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Westpac joins growing list of banks cutting savings rates

Westpac joins growing list of banks cutting savings rates

Australia’s second largest bank, Westpac, has today cut savings rates by up to 0.50 per cent across its popular accounts.

Westpac is one of six banks to cut savings rates today. Its subsidiaries St George, Bank of Melbourne, Bank SA have trimmed as well as ME Bank and Great Southern Bank (formerly CUA).

The cuts come just two and a half weeks after its big four competitor, CBA, also trimmed its savings rates.

This is the third time Westpac has cut its savings rates since the RBA lowered the cash rate in November last year.

Today’s cuts

 Savings account

Old max rate 

New max rate 

Change 

Life (all adults)0.40%0.30%-0.10%
Life (18-29 yrs)3.00%2.50%-0.50%
eSaver0.40% for 5 mths then 0.05%0.30% for 5 mths then 0.05%-0.10% to intro rate

Source: RateCity.com.au Note: To qualify for max rate for Life balance must be higher at end of month. Extra terms apply for young adults.

Westpac savings rates – then and now

Max rate

1 Nov 2020

Max rate

Today

Change

Life (all adults)0.75%0.30%-0.45%
eSaver0.75% (5 mths)0.30% (5 mths)-0.45% (intro rate only)
Cash rate 0.25% 0.10%-0.15%

Source: RateCity.com.au

Analysis of the RateCity.com.au database:

  • 24 banks have cut at least one savings rate in the last month, including CBA, Westpac, and AMP.
  • 6 banks have cut savings rates today. Westpac, St George, Bank of Melbourne, Bank, ME Bank and Great Southern Bank.
  • 0.30% is now the average ongoing savings rate for all adults.
  • 1.35% is the highest ongoing savings rate for all adults (ING).
  • 12 banks offer an ongoing savings rate of 1% or higher.

RateCity.com.au research director, Sally Tindall, said: “Westpac has caved to the pressure of the low-rate environment, cutting savings rates despite no move to the cash rate.”

“While Westpac’s main accounts now have maximum rates of 0.30 per cent, it will continue to offer bonus interest to young Australians, albeit at a reduced rate of 2.50 per cent, the equal highest on the market,” she said.

“Across the board, savings rates continue to sink to new lows with 24 lenders cutting rates in just one month, including Australia’s two biggest banks.

“As a result, the average ongoing savings rate on RateCity.com.au is now just 0.30 per cent – the lowest in our records.

“People need to be shopping around and reading the terms and conditions if they want the highest rates. For example, Westpac’s savings accounts range from just 0.05 per cent all the way through to 2.50 per cent, depending on the fine print.

“With record levels of household deposits in the bank since COVID, it’s important to proactively look for a decent rate,” she said.

Big four bank: conditional savings rates

Bank

Account

Max rate

CBAGoalSaver0.30%
WestpacLife0.30%
NABReward Saver0.30%
ANZProgress Saver0.35%

Source:RateCity.com.au. Conditions apply for max rate.

Big four banks standard savers

Bank

Product

Intro rate (3-5 mths)

Ongoing rate

CBANetBank Saver0.33%0.05%
Westpac eSaver0.30%0.05%
NAB iSaver0.35%0.05%
ANZ Online Saver0.30%0.05%

Source:RateCity.com.au Intro rate terms - CBA & Westpac 5 months, NAB 4 months, ANZ 3 months.

Highest ongoing savings accounts (no age restrictions)

Bank

Max rate 

ING 1.35%
Virgin Money1.50% for 3 mths then 1.20%
86 4001.20%

Source:RateCity.com.au $25k balance. Conditions apply for max interest rate.

Young Adults: highest ongoing savings rates

BankAccountMax rate
Westpac LifeAges 18 to 29 (up to $30K)2.50%
BOQ Fast Track StarterAges 14 to 24 (up to $10K)2.50%

Source:RateCity.com.au Conditions apply for max interest rate.

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This article was reviewed by Head of Content Leigh Stark 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

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 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 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 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 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 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. 

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

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.