Savers suffer as big banks cut bonus rates

Savers suffer as big banks cut bonus rates

ANZ and NAB have today cut the interest rates on their savings accounts on the back of last week’s cut to the cash rate, affecting millions of customers. 

Both ANZ and NAB have chosen to cut their bonus savings rates by 0.25 per cent, leaving their base savings rates untouched. 

CBA, Australia’s largest bank, lowered their savings rates last week. Unlike ANZ and NAB, CBA has dropped the base rate on its popular Net Saver account by 0.05 per cent, in addition to cuts of up to 0.35 per cent on its bonus savings rates. 

RateCity.com.au research director Sally Tindall said that regular savers would be hurt the most by this current round of cuts. 

“Where this latest round of cuts is really going to hurt is with the consistent savers who go above and beyond to make sure they make regular deposits to qualify for high ongoing rates,” she said. 

“They’re going to be penalised by a full 0.25 per cent cut, probably because it’s one of the few places remaining to make cuts that will actually make a difference to the banks’ bottom line. 

“Meanwhile, the big banks’ standard savings accounts are about as satisfying as an English summer. They’re good for a very short stint before settling into a cold bleak reality. The truth is, even before this rate cut, they earned next to nothing after the introductory period expires. 

“Keen savers can still get relatively competitive rates, if they’re prepared to look beyond the big banks. Neo bank 86 400, and MyState Bank are still offering 2.50 per cent on their savings rate which are now two of the best rates on the market,” she said. 

Today’s cuts by ANZ and NAB are on the same day their home loan changes take effect. CBA has opted to cut its savings rates over two weeks in advance of its home loan changes. 

So far, 27 banks have cut savings rates with the remaining big bank, Westpac, still expected to cut post RBA. 

Changes to standard savings accounts 

These accounts have no ongoing terms and conditions. They typically include an introductory period which offers bonus interest for several months, before dropping to a low ongoing rate. 

 

Max rate (3 - 5 mths)

Base rate

 

Old rate

New rate

Change

Old rate

New rate

Change

ANZ Online Saver

1.85%

1.60%

0.25%

0.10%

0.10%

0.00%

NAB iSaver

2.11%

1.86%

0.25%

0.11%

0.11%

0.00%

CBA Netbank

2.00%

1.65%

0.35%

0.15%

0.10%

0.05%

Note: the intro rate periods are as follows: ANZ 3 mths NAB 4 mths; CBA 5 mths. 

Changes to conditional savings accounts 

These accounts require you to meet certain terms and conditions, such as one deposit a month and no withdrawals, in order to qualify for the bonus interest that month. 

 

Max rates (if conditions are met)

Base rate

 

Old rate

New rate

Change

Old rate

New rate

Change

ANZ Progress saver

1.85%

1.60%

0.25%

0.01%

0.01%

0.00%

NAB Reward saver

1.86%

1.61%

0.25%

0.11%

0.11%

0.00%

CBA Goal saver

1.15%

0.90%

0.25%

0.01%

0.01%

0.00%

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

Highest ongoing savings rates on RateCity.com.au 

Bank

Max rate

Conditions

86 400

2.50%

Deposit $1K /mth

MyState Bank

2.50%

$20/month & 5 or more transactions on linked account

Up

2.25%

5 or more transactions on linked account

Australian Unity

2.25%

$250/mth

RAMS

2.25%

$200/mth & no withdrawals

Notes: excludes kids savers and introductory rates.

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Fact Checked -

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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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

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

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 an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

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.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

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.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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 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.

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 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.