How to find a bank account that rewards you

How to find a bank account that rewards you

Following recent RBA cash rate cuts, many leading banks have slashed interest rates on their savings accounts, term deposits and other bank accounts, making it harder for everyday Aussies to grow their wealth.  

So if you want a simple way to earn a little money on your savings, what should you look for when choosing a bank account?

Interest rate – base rate vs maximum rate

The simplest way to be rewarded for your everyday banking is to choose an account that earns you interest on your savings. This usually means looking for a dedicated savings account, rather than an everyday transaction account.

To get an idea of how much interest you can earn with a savings account, look at both its base rate and its maximum rate. The base rate is the minimum interest you’ll earn on savings in your account, while the maximum rate is how much interest you could potentially earn, provided you fulfil the account’s terms and conditions.

Special offers

Some bank accounts and savings accounts offer additional features and benefits that can prove valuable to the right saver. 

These could include:  

  • discounts on the bank’s other financial products
  • cash back on your spending
  • access to other exclusive rewards

Example

HSBC recently added the Everyday Extras rewards program to its Everyday Global Account, allowing account holders to earn up to 2% cash back on eligible tap and pay purchases under $100. This could allow an account holder to earn up to $600 per year in cash back.

Plus, Everyday Global Account holders who also hold HSBC Serious Saver Accounts would receive an additional 0.40% bonus interest on top of that account’s ongoing variable rate, to further grow their wealth.

Terms and conditions 

To enjoy higher interest rates and other features and benefits, most banks will require you to fulfil certain terms and conditions, often designed to help encourage you to save.

These may include:

  • Making a minimum number of deposits per month
  • Depositing a minimum balance per month
  • Making no withdrawals, or keeping your withdrawals under a maximum number 

Several savings accounts offer higher introductory interest rates, where new customers can earn more interest for a limited time after opening a savings account. After the introductory period expires, these savings accounts will often revert to a standard interest rate, which is typically lower than the intro rate.  

Example

To receive the benefits of Everyday Extras described earlier, you’ll need to deposit a minimum of $2000 per month in your HSBC Everyday Global Account.

Also, the introductory rate on the HSBC Serious Saver Account applies for the first four months, before reverting to the ongoing variable rate, and interest is paid every month you don’t make a withdrawal.

Further terms and conditions apply to both accounts.

Fees and charges 

Like many other financial products, some savings accounts and bank accounts charge fees. These can include upfront fees when you open the account, or ongoing fees to help cover the account’s admin costs.

One quick way to estimate if a bank account will be worth it for you is to use a savings calculator to find how much interest you could earn from the account in a year, and to compare this to the annual cost of any fees.

If you’ll pay more in fees than you’ll make in interest, you may want to consider other options. But if you’ll enjoy more in value than you’ll pay in fees, then the bank account may be one to add to your shortlist.

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Learn more about savings accounts

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.