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What are ADIs and how could they protect your savings?

What are ADIs and how could they protect your savings?

With the RBA slashing Australia's cash rate, and big banks cutting savings rates, it's getting harder and harder to find savings accounts paying interest at a rate higher than inflation. In times like these, many Aussies are searching for alternative options to the big banks to help grow their wealth. 

Some neobanks and other smaller banks are offering higher than average savings rates, however not all Australians are confident about depositing their money with these institutions. After all, in uncertain economic times, how could you be sure that your savings would be safe with a bank that doesn’t have decades of experience to call on?

Fortunately, there is a way to check if your money in a bank is guaranteed against the risk of financial collapse – check if the bank is an ADI. 

What is an ADI?

In Australia, banks, building societies, credit unions and other financial institutions are sometimes referred to as Authorised Deposit-taking Institutions, or ADIs.

This refers to financial institutions that are licensed to accept and hold deposits of money from the general public, including savings accounts, term deposits, and home loan offset accounts.  

Who decides which banks can be ADIs?

ADIs are licensed and authorised by the Australian Prudential Regulation Authority (APRA), which supervises Australia’s financial industry.

Why should I deposit money with an ADI?

Firstly, Australian banks (and international banks that want to operate in Australia) need to register as an ADI with APRA to legally accept deposits in Australia.

Secondly, money that you deposit with a licensed ADI is guaranteed by the Australian government under the Financial Claims Scheme (FCS). This means that if the bank was to go out of business, the government would be able to make sure you get your money back.

How much money does the Financial Claims Scheme cover?

The government’s FCS guarantee covers up to $250,000 per person. If you deposited more than $250,000 with an ADI, and that ADI collapsed, you’d only be able to claim back a maximum of $250,000 from the government. This includes if your money is spread across multiple accounts with the ADI.

Also, keep in mind that some ADIs operate under multiple trading names. If you have money deposited with multiple banks that all operate as part of the same ADI, only $250,000 in total will be guaranteed.  

Even if part of the money you’ve deposited with an ADI isn’t guaranteed by the FCS, you may not necessarily lose it if the ADI was to go out of business. This would depend on how the liquidation process is managed. Learn more about FCS payments.

Does a financial institution need to be an ADI?

A business doesn’t have to be an ADI to offer certain financial services, such as lending money.

For example, some online-only mortgage lenders specialise in providing home loans with low interest rates, and some car dealerships offer car loans from vehicle finance specialists.  

But if you want to deposit money into a term deposit or savings account, you’ll need to choose an ADI, as non-ADIs can’t legally accept deposits in Australia.

Restricted ADIs (RADIs)

If a company is first starting out in the finance industry (for example, a newly-established neobank), they may be able to apply to become a Restricted ADI for a two-year period. During this time, they can accept deposits of up to $250,000 per account holder, and hold a maximum total balance of $2 million across all accounts.

Once the two-year RADI period is up, the institution will need to apply for a full ADI license, or exit the industry.

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This article was reviewed by Finance Writer Alison Cheung before it was published as part of RateCity's Fact Check process.



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Learn more about savings accounts

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.

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

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.

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). 


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.

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. 

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. 

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.

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.

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.

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 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 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.