State of play - savings accounts then and now

State of play - savings accounts then and now

It’s getting harder and harder for savers in Australia, as savings accounts continue to dip below 1 per cent.

Savings accounts may be becoming nothing more than a safe place to store your money following two Reserve Bank of Australia (RBA) cash rate cuts in March. This has brought the cash rate down to 0.25 per cent off the back of five RBA-led cuts since June last year.

This means it’s more important than ever for Aussies to take charge of their finances and ensure they’re getting the most competitive deal on their savings account(s).

How the big four banks have changed in 2020

This week, ANZ and NAB announced further reductions to their savings account rates in response to the emergency Reserve Bank of Australia cash rate cut on March 19.

ANZ and NAB customers have now seen their standard savings account introductory rates fall by 0.70 per cent since the start of the year.

Australia’s biggest bank, CommBank, also cut bonus rates on its Goal Saver account by up to 0.35 per cent, while increasing the base rate on this account by 0.09 per cent, earlier this month.

Westpac has not yet announced if/when it will pass on the emergency RBA cash rate cut to its customers.

The big four bank customers aren’t alone. Analysis from RateCity.com.au shows that 29 banks have cut their rates twice since the 4 March rate cut.

For millions of savings account customers across Australia, that means the home renovation or house deposit they’re saving for will be, once again, further off than originally planned.

Big four bank standard savings accounts, then and now

Bank Product Intro term Intro rate - 1 Jan 2020 Intro rate - 15 April 2020 Intro rate change
CBA NetBank Saver 5 months

1.65%

1.00%

-0.65%

Westpac eSaver 5 months

1.66%

1.25%

-0.41%

NAB iSaver 4 months

1.70%

1.00%

-0.70%

ANZ Online Saver 3 months

1.60%

0.90%

-0.70%

Note: rates based on a balance under $50k.

Big four bank conditional savings accounts, then and now

Bank Product Base rate - 1 Jan 2020 Base Rate – 15 April 2020 Base rate - change Max rate - 1 Jan 2020 Max Rate - 15 April 2020 Max rate change
CBA Goal Saver

0.01%

0.10%

0.09%

0.90%

0.50%

-0.40%

Westpac Life

0.45%

0.40%

-0.05%

1.65%

1.30%

-0.35%

NAB Reward Saver

0.11%

0.05%

-0.06%

1.61%

1.25%

-0.36%

ANZ Progress Saver

0.01%

0.01%

0.00%

1.60%

1.00%

-0.60%

Note: rates based on a balance under $50k

Meanwhile, banks like ING, Bank of Queensland and ME Bank announced relief for their savers who qualified for bonus interest in the past three months, by letting them automatically earn bonus interest for the next three months.

Saving accounts plunging below inflation

Analysis from RateCity.com.au shows that the average maximum interest rate on a conditional savings account has fallen 28 basis points since January 1, and the average standard savings account base rate has fallen 15 basis points.

Average savings account rates, then and now

Date Avg. max conditional rate* Avg. standard base rate
15 January 2020 1.54% 0.52%
15 April 2020 1.26% 0.37%
Change -0.28% -0.15%

Note: average rates based on a $25k balance. *Excludes introductory rates.

While this may seem small, it can seriously add up when you consider inflation.

Experts recommend keeping your savings account rate above inflation, otherwise your savings may not be ‘growing’ at all.

  • Inflation is the rate at which the value of a basket of goods and services increases over time. Put simply, your money today may be worth less in a few years. For example, it’s the reason a movie ticket cost only a few dollars 50 years ago, compared to $20 or more today.

According to the RBA, the current inflation rate is 1.8 per cent. If your savings aren’t growing at the rate of inflation or higher, and you’re not making any additional deposits into your savings, then the value of your money may actually be decreasing over time. Your savings account might simply be just a safe place to park your money.

Searching for high interest savings accounts

As savings accounts dip further below inflation, it may become challenging for Aussies to see serious gains on their savings any time soon.

Shopping around for a more competitive savings account may be one option to consider if you’re not confident your savings account is earning you enough interest.

The easiest way to do this is to use comparison tools, such as comparison tables and calculators.

  • Savings account comparison tables allow you to filter down and compare a range of options designed to suit your specific financial needs. You can view a range of accounts maximum interest rates, as well as compare how much interest you may earn on your original deposit.
  • Savings account calculators can then help you calculate how much your savings may grow over time. This can be a handy resource when planning savings goals, such as a holiday, to see how long it will take to achieve this.

If you’re looking for a savings account offering interest rates above inflation, there are still options to compare.

RateCity’s database shows there are 14 savings accounts currently offering interest rates above inflation.

Market leading standard savings accounts

Bank Product Intro rate Intro Term Base Rate
Macquarie Bank Savings Account

2.65%

4 months

1.35%

AMP Saver Account

2.26%

6 months

1.05%

Rabobank Online Savings High Interest Savings Account

2.25%

4 months

0.80%

Heritage Bank Online Saver

2.20%

4 months

0.80%

Note: data excludes kids and pensioner savings accounts.

Market leading conditional savings accounts

Bank Product Base rate Max. rate Conditions
MyState Bank Bonus Saver 0.30% 2.00% Monthly deposit of $20, 5 transactions in linked account
BOQ Fast Tracker 0.20% 2.00% Monthly deposit of $1,000 in linked account
Suncorp Growth Saver 0.20% 1.90% Monthly deposit of $200, minimum one withdrawal a month
86 400 Save 0.25% 1.85% Monthly deposit of $1,000 in linked account

Note: data excludes kids and pensioner savings accounts.

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Fact Checked -

This article was reviewed by Personal Finance Editor Mark Bristow 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 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 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.

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 multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

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.

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.

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.

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.

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. 

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 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.

What are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product).