Savings rates keep falling as CBA, NAB and ING all make cuts

Savings rates keep falling as CBA, NAB and ING all make cuts

Savings rates continue to tumble, despite no move to the cash rate, with NAB the most recent big four bank to cut its rates today by up to 0.10 per cent.

Australia’s fifth largest bank, ING, also dropped the maximum rate on its popular Savings Maximiser account today, while CBA cut the bonus rate on its GoalSaver earlier in the week for balances over $50,000.

Recent cuts:

  • NAB iSaver: introductory rate cut by 0.10% to 0.95% (first 4 mths). Ongoing rate unchanged at 0.05%
  • NAB Reward Saver: bonus rate cut by 0.10%. Max rate is now 0.90%.
  • ING Savings Maximiser: max rate cut by 0.15%. Max rate is now 1.65%
  • CBA GoalSaver: max rate cut by 0.05% for balances over $50K.

Analysis of the RateCity database shows that 64 per cent of banks have cut at least one savings rate in the last two months, despite no move to the cash rate since March.

RateCity research director, Sally Tindall, said banks will continue to chip away at deposit rates to help balance their books.

“Banks are feeling the heat at the other end of the equation where there is immense pressure to put competitive home loan rates on the table,” she said

“There’s little competition between the banks for deposits right now. As a result, banks can chip away at these rates, often without too much blowback.

“The exception here is Westpac. It’s offering 3 per cent on balances of up to $30,000 for anyone aged between 18 and 29.

“This is a remarkable offer from Westpac given the current environment. There’s daylight between this rate of 3 per cent and what’s on offer from its big four competitors,” she said.

Highest ongoing savings rates on the RateCity database

Bank Max rate Base rate Conditions for max rate
Australian Unity 1.75% 0.25% Deposit $250+/mth and no withdrawals.
MyState Bank 1.75% 0.15% Deposit $20+/mth and make 5+ purchases in linked account.
86 400 1.70% 0.25% Deposit $1k+/mth in linked account

Big four banks: highest ongoing savings rates

Bank Product Base rate Max rate Conditions
CBA Goal Saver

0.10%

0.50%

Deposit $200+/mth, no withdrawals.
Westpac Life (30 and over)

Life (ages 18 to 29)

0.40%

0.40%

1.00%

3.00%

Balance needs to be higher every mth*
NAB Reward Saver

0.05%

0.90%

1+ deposit and no withdrawals per mth
ANZ Progress Saver

0.01%

0.85%

Deposit $10+/mth, no withdrawals

Note: based on a balance of less than $50K. CBA has higher rates for higher balances. For the Westpac Life account for 18-29 year olds you also need to make 5+ transactions on a linked transaction account.

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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 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 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 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

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 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 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.

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. 

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 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 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.

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.

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.