Tough time for savers as the big four banks slash interest rates

ANZ is the last of the big four banks to cut their savings account rates, following the Reserve Bank’s decision to cut the cash rate earlier this month. 

ANZ today reduced the rates on their Progress Saver and Online Saver accounts by 0.20 per cent – 2 basis points more than they passed onto their home loan customers on 14 June 2019. 

As of today, ANZ still offers the highest ongoing savings rate out of the big four of 2.20 per cent, while Westpac offers the highest introductory rate of 2.31 per cent for a period of 5 months. 

RateCity.com.au research director Sally Tindall said: “Introductory rates have become the white elephant of banking.” 

“All four big banks have slashed their base rates to just 0.30 per cent interest, when inflation is sitting at 1.3 per cent. That’s a nightmare equation for anyone trying to save. 

Conditional rate savings changes: Big4 

Bank

Product

Max Rate  Pre RBA

Max Rate  Post RBA

Change

Conditions

CBA

GoalSaver

2.00%

1.70%

0.30%

Dep $200/mth, no withdraw, for bal $50K-$250K

Westpac

Life

2.30%

2.10%

0.20%

Make 1 dep/mth, balance higher at end of mth

NAB

Reward Saver

2.30%

2.05%

0.25%

1 dep/mth, no withdrawals

ANZ

Progress Saver

2.40%

2.20%

0.20%

Deposit $10/mth, no withdrawals

Intro rate savings changes: Big4 

Bank

Product

Base rate Pre-RBA

Max rate Pre RBA

Base rate Post RBA

Max rate Post RBA

Total change

Intro term

CBA

Netbank Saver

0.50%

2.51%

0.30%

2.20%

0.31%

5 mths

Westpac

eSaver

0.50%

2.51%

0.30%

2.31%

0.20%

5 mths

NAB

iSaver

0.50%

2.55%

0.30%

2.30%

0.25%

4 mths

ANZ

Online Saver

0.50%

2.30%

0.30%

2.10%

0.20%

3 mths

 RateCity.com.au data shows that over 47 banks have dropped their savings rates since the RBA cash rate cut on June 4, including ING, AMP, Bank of Queensland, ME, Suncorp and Bendigo, in addition to the big 4 banks. 

The average cut to savings account rates by banks who have moved is 0.23 per cent, while the maximum cut on the database is 0.50 per cent. As a result of all the changes, the average savings account rate on RateCity.com.au’s database is now 1.55 per cent*. 

“There’s no sugar coating the outlook for savers right now. With at least one, if not two more cuts to the cash rate on the horizon, the average saving rate could fall to 1.30 per cent. 

“Good saving rates might be hard to come by but it’s still worth shopping around,” she said. 

Market leading saving account rates

Account

Max rate

Conditions

UBank

2.87%

Mthly deposit of $200, no withdraw

BOQ

2.75%

Deposit $1K into linked trans a month

Endeavour Mutual Bank

2.75%

For people up to 35 years, monthly deposit of $400

ME Bank

2.60%

1 tap & go payment/wk with linked account

UBank has not cut this rate since the RBA cash rate change on June 4.  

Conditional rates:

These are savings accounts that require the customer to meet certain conditions every month in order to get the maximum rate of interest on an ongoing basis. 

Introductory rates

These are savings accounts where customers get a bonus interest rate for a short period of time when the account is first opened, typically between 3 and 5 months. 

*RateCity.com.au’s average savings rate excludes kids accounts and intro rates. Where conditions are required to get the maximum interest, it assumes these conditions are met.

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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.

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 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.

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. 

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.

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.