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The savings accounts with higher interest rates than home loans

The savings accounts with higher interest rates than home loans

While home loan interest rates have plunged to as low as 2.09 per cent, some banks have lifted their short-term savings rates to as high as 2.65 per cent for new customers.

Today AMP raised its introductory savings rate by 0.54 per cent to 2.65 per cent. The variable introductory rate is for 6 months, after which time it drops to 1.05 per cent.

Macquarie Bank is also offering a variable introductory rate of 2.65 per cent for the first four months and an ongoing rate of 1.35 per cent.

While the introductory savings rates only last for between four and six months for new customers, it’s unusual to see banks offering higher savings rates than some of their home loan rates.

Highest introductory savings account rates on RateCity

BankAccountIntro rateIntro termOngoing RateNotes
Macquarie BankSavings Account2.65%4 months1.35%On balances up to $250k
AMPSaver Account2.65%6 months1.05%On balances up to $500k
Heritage BankOnline Saver2.30%4 months0.90%On balances up to $100k
RabobankHigh Interest Savings Account2.25%4 months0.80%On balances up to $250k

Source: RateCity.com.au. Note: Rates accurate as of 27.03.2020

However, it’s not all good news for savers with over 60 banks cutting savings rates this month.

Among those are neo-bank market leaders 86 400 and Up, while Xinja has suspend its savings account for new customers.

Highest ongoing savings account rates on RateCity

BankMax rateBase rateConditions for max rate
MOVE Bank2.00%0.80%Deposit $200+ per mth, no withdrawals
86 4002.00%0.40%Deposit $1,000+ per mth
MyState Bank2.00%0.30%Deposit $20+ per mth and 5 purchases from linked trans account
Up2.00%0.25%5+ purchases per mth from linked trans account
BOQ2.00%0.20%Deposit $1K + 5 trans into linked account per mth

Source: RateCity.com.au. Note: Rates accurate as of 27.03.2020

RateCity research director Sally Tindall said: “It’s hard to believe we’re seeing savings rates that are higher than some fixed home loan rates, even if they are only for a short time.”

“Although it’s positive to see some banks offering relatively high introductory rates, it’s the ongoing savings rates that are most crucial in the long run.

“Serious savers who are making regular deposits can still get ongoing interest rates of 2 per cent, if they shop around,” she said.

Interestingly, CBA cut the introductory savings rate on its popular NetBank savings account yesterday by 0.25 per cent. Australia’s biggest bank is now offering 1.05 per cent for the first five months on its NetBank saver account, after which time it drops to an ongoing rate of just 0.05 per cent.

“With rates that low, the NetBank saver is little more than a safe place to park your cash.

“With banks moving deposit rates in different directions, now is a good time to take stock of your savings and make sure you’re getting the most out of the cash you have in the bank,” she said.

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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.

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.

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 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. 

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 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.

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.

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

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 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.