Savings account interest rates have been lagging
IT’S no secret that banks are quick to pass on interest rate increases to borrowers and slow to pass them on to savers.
After their March meeting the RBA announced their tenth consecutive cash rate hike bringing the rate up to 3.6 per cent.
This means that since April 2022 the cash rate has risen 3.5 per cent. But over the same time the interest rate on a basic deposit account has grown by less than 2 per cent.
The ACCC will be looking into this in their ongoing retail deposits inquiry.
Rates are starting to catch up
Most basic savings accounts still aren’t up to par with the cash rate. Depending on where you look you should be able to find one offering just over 2 per cent interest per annum.
Bonus savings accounts on the other hand offer a bit more bang for your buck.
The big four banks can get you around 4 per cent interest per annum, but if you shop around you should be able to find something even better.
For example, ING’s Savings Maximiser account can get you up to 5 per cent interest per annum.
There is a catch though.
Most of these high reward accounts have conditions you must meet each month. Often this is a significant deposit, of say $500 or $1,000, and a minimum number of purchases from the account each month.
If you can’t meet these requirements the base interest rate can be as low as 0.1 per cent.
How to find the best deal
So, what is the best way to make the most of your savings and avoid missing out?
Don’t be held back by brand loyalty. Often when you first transfer to a new bank you’ll get a new customer rate for a few months before being dropped down to a lower existing customer rate. If you’re not happy with this rate you always have the option to shop around.
When doing this it’s important to know how you do your banking and what works for you. If you’re familiar with online banking and have the time to stay on top of it, meeting bonus conditions might be a piece of cake for you.
But if you prefer to bank face-to-face, depositing $1,000 every month and keeping track of your transactions is much harder.
If the conditions seem unachievable, you’d be better off taking a slightly lower interest rate that’s easier to maintain.
Remember that if you forget to meet the requirements, your interest rate drops down to a negligible percentage, and you could miss out on a lot of money.
If changing banks seems too confusing, you could also try calling or, if your local branch hasn’t closed, visiting your existing bank. They aren’t going to be able to negotiate rates, but they can lay out all of your options, and potentially find you a better deal. Sometimes they might even be willing to extend the higher introductory rate.