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

Bank Account Intro rate Intro term Ongoing Rate Notes
Macquarie Bank Savings Account 2.65% 4 months 1.35% On balances up to $250k
AMP Saver Account 2.65% 6 months 1.05% On balances up to $500k
Heritage Bank Online Saver 2.30% 4 months 0.90% On balances up to $100k
Rabobank High Interest Savings Account 2.25% 4 months 0.80% 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

Bank Max rate Base rate Conditions for max rate
MOVE Bank 2.00% 0.80% Deposit $200+ per mth, no withdrawals
86 400 2.00% 0.40% Deposit $1,000+ per mth
MyState Bank 2.00% 0.30% Deposit $20+ per mth and 5 purchases from linked trans account
Up 2.00% 0.25% 5+ purchases per mth from linked trans account
BOQ 2.00% 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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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.

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.

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)

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.

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.

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.

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

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.