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Westpac shaves savings interest rates by up to 0.20%

Westpac shaves savings interest rates by up to 0.20%

One of the country’s biggest banking groups, Westpac Group, has taken the axe to some savings account rates across its subsidiaries, St. George, BankSA, Bank of Melbourne and RAMS. 

Westpac group has made cuts of up to 0.20 per cent to some introductory and bonus savings interest rates.

The base rates across the group’s accounts remain unchanged, bar RAMS.

Westpac’s 3 per cent saver rate for young people aged 18-29 has not been affected.

Westpac

Westpac has cut the bonus rate on its Life savings account by 0.15 per cent to 0.45 per cent and a maximum possible rate of 0.85 per cent.

The bank also reduced the five-month introductory rate on its eSaver account by 0.15 per cent, taking it down to 0.80 per cent and the maximum rate to 0.85 per cent.

Westpac, which previously had the highest honeymoon savings rate among the big four banks of 1 per cent, has been stripped of the title due to the changes.

Westpac Life

Old max rate (%)New max rate (%)Old bonus rate (%)New bonus Rate (%)Change (%)
10.850.600.45-0.15%

Westpac eSaver

Old max rate (%)New max rate (%)Old bonus rate (%)New bonus rate (%)Change (%)
10.850.950.80-0.15%

St. George, Bank of Melbourne, BankSA

Westpac subsidiaries St. George, Bank of Melbourne and BankSA have slashed their bonus rates to 0.70 per cent across their Incentive Saver accounts.

  • For balances under $100,000, the bonus rate has been cut by 0.10 per cent.
  • For balances between $100,000 and $250,000, the bonus rate has been cut by 0.15 per cent.
  • For balances of more than $250,000, the bonus rate has been cut by 0.20 per cent.

The three banks have also trimmed its three-month introductory rates on its Maxi Saver accounts by 0.20 per cent to 0.85 per cent.

Incentive Saver

TierOld max rate (%)New max rate (%)Old bonus rate (%)New bonus rate (%)Change (%)
<$100k1.00.900.800.70-0.10
$100k -$250k1.050.900.850.70-0.15
>$250k1.100.900.900.70-0.20

Maxi Saver

Old max rate (%)New max rate (%)Old bonus rate (%)New bonus rate (%)Change (%)
1.100.901.050.85-0.20

RAMS

RAMS has shaved the base rate for most savers by 0.20 per cent, bringing it down to 0.25 per cent. Its bonus rates have not been changed.

RAMS Saver

TierOld Max Rate (%)New Max Rate (%)Old Base Rate (%)New Base Rate (%)Change (%)
<$500k1.10.90.450.25-0.20
$500k – $5m0.450.250.450.25-0.20

A Westpac spokesperson said the low cash rate environment was a factor in making today’s interest rate decision.

“When making these changes, we carefully considered how we can continue to support our customers with their savings needs, while managing the commercial pressures of the low interest rate environment,” they said.

“We have limited these decreases to the headline rate on certain products. There have been no changes to the base rate for our eSaver, Life, and Bump accounts.

“Westpac continues to offer a market-leading 3 per cent per annum variable savings rate for customers between 18 – 29 years of age who hold a Westpac Choice and Westpac Life account and meet the Spend&Save bonus interest criteria.”

Savers feel the squeeze

While mortgage holders welcomed the news of an unchanged cash rate from the Reserve Bank of Australia, savers are continuing to feel the squeeze in the low cash rate environment. 

More than 50 banks slashed savings account rates since August 1, including the likes of Commonwealth Bank, Westpac, Macquarie Bank and AMP, RateCity analysis showed. 

The average cut among the banks that reduced their savings rates in the past month was 0.18 per cent. 

Average savings rates have fallen across the board in the past 12 months. The average ongoing maximum rate was 1.14 per cent in 2019 but has since declined to 0.57 per cent.

The average base rate has more than halved, from 0.64 per cent last year to 0.30 per cent today.

Macquarie Bank reduced its honeymoon rate last week by 0.50 per cent to 1.50 per cent on balances of up to $250,000, while AMP removed its welcome rate. 

HSBC also trimmed the interest rate on its Serious Saver account by 0.35 per cent to 1.75 per cent. 

Illawarra Credit Union made the biggest rate cut recorded by RateCity in the past month, shaving 0.60 per cent off its Saver product for those with balances between $50,000 and $100,000.

Despite the savings rate cuts, Australian banks saw a 6 per cent jump in deposits since COVID-19 began, according the latest figures from the Australian Prudential Regulation Authority, as many families batten down the hatches during the pandemic.

Households tucked away $64 billion between March and July, the data showed.

Australians have also been hacking away at their plastic debt, with a 17 per cent drop in credit card balances between March and July, equivalent to more than $6 billion in high-interest debt repaid.

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Fact Checked -

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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Learn more about savings accounts

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.

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 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. 

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.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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.

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 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 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.

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.

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.