Regular savers take the fall as CBA cuts bonus rates

Regular savers take the fall as CBA cuts bonus rates

Australia’s biggest bank, CBA, has today cut interest rates on some savings accounts by up to 0.30 per cent on the back of last week’s cut to the cash rate.

The bank has reduced the ongoing bonus rates on their Goal Saver account by 0.25 per cent, their pensioner security account by up to 0.25 per cent and their Youth Saver account by 0.30 per cent. The bank’s NetBank Saver account, which has an ongoing rate of just 0.10 per cent, remains unchanged.

The savings rate cuts come two weeks before the bank’s home loan changes come into effect.

CBA GOAL SAVER ACCOUNT

Balance   Before Now Difference
Under $50K Max Rate 0.90% 0.65% 0.25%
Base rate 0.01% 0.01% -
$50K-$249K Max Rate 1.25% 1.00% 0.25%
Base rate 0.01% 0.01% -
$250K - $999K Max Rate 1.60% 1.35% 0.25%
Base rate 0.01% 0.01% -
+1M Max Rate 0.01% 0.01% -
Base rate N/A N/A N/A

Conditions for max rate: deposit $200 or more and make no withdrawals per month.

YOUTH SAVER ACCOUNT

  Before Now Difference
Max Rate 1.85% 1.55% -0.30%
Base rate 0.10% 0.05% -0.05%

Conditions for max rate: at least one deposit and no withdrawals a month. Up to age 18.

RateCity.com.au research director Sally Tindall said regular savers will be impacted the most by these cuts, as the bank attempts to recoup some of the costs from their home loan cuts.

“Savers who go above and beyond to qualify for bonus interest deposits are going to be stung the most by these cuts,” she said.

“CBA is one of six banks so far to cut deposit rates since last week’s cash rate cut, with dozens more expected to follow.

“It’ll be interesting to see how far Westpac, NAB and ANZ shave their rates, seeing as they’ve already taken the knife to some of their savings rates this year.

“In this low rate environment, finding a savings rates above inflation can feel like finding a needle in a haystack, but they are out there.

“The highest rate on RateCity.com.au’s database is 2.25 per cent, on offer from neobanks 86 400, and Up, but these rates are unlikely to stick around,” she said.

Highest ongoing savings rates on RateCity.com.au

Bank Max rate Conditions
86 400

2.25%

Deposit $1K /mth
Up

2.25%

5 or more transactions on linked account
Bank of Queensland

2.15%

Deposit $1K into linked accounts and make 5+ transactions

Notes: excludes kids’ savers and introductory rates.

Big four bank conditional savings accounts

Bank Product Base Rate Max Rate Conditions
CBA Goal Saver

0.01%

0.65%

Mthly deposit of $200, no withdraw
Westpac Life

0.45%

1.55%

Mthly deposit, account balance must have increased
NAB Reward Saver

0.11%

1.50%

Mthly deposit, no withdraw
ANZ Progress Saver

0.01%

1.60%

Min mthly deposit of $10, no withdraw

Notes: Rates based on balances less than $50,000. CBA offers higher rates for larger deposits.

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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

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.

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 can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

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.

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.

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.

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.

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.

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.

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 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. 

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.