NAB becomes the third big bank to cut savings rates out-of-cycle

NAB becomes the third big bank to cut savings rates out-of-cycle

NAB has today cut two of its popular savings accounts by 0.15 per cent, despite no move from the RBA since November.

Analysis from RateCity.com.au shows 23 banks have cut savings rates already in 2021, including CBA and Westpac last Friday and NAB today.

These three banks and their subsidiaries hold 61.5 per cent of household deposits, according to the latest APRA statistics released today (see tables below for full details).

NAB Reward Saver cuts

  Old rate Today Difference
Max rate

0.55%

0.40%

-0.15%

Make at least 1 deposit on or before the second last day of the month and no withdrawals per mth for max rate.

NAB iSaver cuts

 

Old rate

Today

Difference

Intro rate (4 mths)

0.60%

0.45%

-0.15%

Ongoing rate

0.05%

0.05%

0%

RateCity.com.au savings database analysis:

  • 23 banks have cut at least one savings rate since January 1 this year.
  • The average ongoing savings rates is now 0.38%.
  • 1.35% is the highest ongoing savings rate for all Australians.
  • A year ago, the highest ongoing savings rate was 2.25% (0.90% change).
  • Currently 15 banks are offering ongoing savings rates of 1% or higher (excluding pensioner and youth accounts).

 

RateCity.com.au research director, Sally Tindall, said: “NAB’s decision to cut savings rates out-of-cycle comes as no surprise. It follows similar moves from rivals CBA and Westpac last week as the low rate environment continues to pressure profit margins.

“A distinct lack of competition in the market is allowing banks to quietly chip away at their rates without too much blowback,” she said.

“Despite record low rates, we’ve never had more money in the bank. The problem is the banks don’t particularly want it.

“Right now, around 60 per cent of Australians have their money with CBA, Westpac and NAB and their subsidiaries, even though some of these savers are getting rates as low as 0.05 per cent.

“NAB customers would do well to shop around, as there are 15 banks offering ongoing rates of 1 per cent or higher," she said.

Latest deposit statistics from APRA – released today

  Dec-20 Dec-19 Difference
Deposits by households

$1.1 trillion

$986.7 billion

$125.9 billion

12.8% increase

Source: Deposit data from APRA monthly banking stats released 29 Jan, 2021.

Big four banks: Market share of household deposits

Bank Deposits Dec-20 % share of market
CBA

$302.5 B

27.2%

Westpac

$232.5 B

20.9%

NAB

$149.0 B

13.4%

ANZ

$140.6 B

12.6%

Total

$824.7B

74.1%

Source: APRA Monthly Banking Statistics, December 2020, released 29 January 2021 Note: the totals above include banks' subsidiaries.

Highest ongoing savings accounts on RateCity.com.au

(excludes accounts specifically for younger Australians)

Bank Account Max rate
ING Savings Maximiser

1.35%

86 400 Save account

1.20%

MyState Bank Bonus Saver Account

1.20%

ME Bank Online Savings Account

1.20%

Source: RateCity.com.au. Conditions apply for max interest rate.

Big four banks conditional savings rates

Bank   Account   Max rate

(if conditions met)

 
CBA   GoalSaver  

0.45%

 
Westpac   Life  

0.40%

 
NAB   Reward Saver  

0.40%

 
ANZ   Progress Saver  

0.50%

 

Source: RateCity.com.au. Note rates are for balances over $50K.

Big four banks standard savings rates

Bank   Account   Max Intro rate   Ongoing rate  
CBA   NetBank Saver (5 mths)  

0.50%

 

0.05%

 
Westpac   eSaver (5 mths)  

0.40%

 

0.05%

 
NAB   iSaver (4 mths)  

0.45%

 

0.05%

 
ANZ   Online Saver (3 mths)  

0.45%

 

0.05%

 

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Learn more about savings accounts

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 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.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

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.

What are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 

 

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.

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.

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.

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. 

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.