Rates are on the rise so we’ve compared the best savings interest rates in the country. We’ve also calculated how much of a difference even one per cent could make to your savings.
Less than one percentage point may not seem like a lot, but when it comes to a savings account it can quickly add up.
Money Smart recommends online savings accounts because they offer higher interest rates than other accounts and are usually online making it more difficult to access the funds.
Financial institutions have different types of interest rates. There is the base rate and if you open a new account and meet certain terms and conditions you can earn bonus interest. You also have the ability to earn a honeymoon rate, which is where you earn a higher rate for a certain period of time. It is always worth checking what the rate will be after the honeymoon period ends.
How do different banks compare savings account interest rates?
According to research on Canstar, the best savings account is Virgin Money’s Boost Saver. It has a base of 0.05 per cent, but a bonus of 3.25 per cent. You can get this if you deposit at least $2,000 a month into a Go account and make five payments. That takes the total interest to 3.30 per cent. On a balance of $1,000, you would earn a monthly interest of $2.75.
ING’s Savings Maximiser is the next best with a base rate of 0.55 per cent and bonus interest of 2.55 per cent if you deposit at least $1,000 from an external account and make at least five card purchases a month and increase the balance. The total interest is $2.58 per month on a balance of $1,000.
Ubank’s base interest rate is slightly lower at 0.10 per cent, but you can earn bonus interest. The bonus interest rate is 2.75 per cent if you deposit at least $200 a month with Spend and Save bringing the total interest to 2.85 per cent. The monthly amount you could earn is $2.38.
Great Southern Bank’s base interest rate is higher at 0.15 per cent and if you deposit at least $500 you can earn a bonus rate of 2.50 per cent. You’ll also need to make five card purchases. That brings the total interest to 2.65 per cent. The monthly earnings would be $2.21.
Rabobank’s PremiumSaver attracts a higher base interest rate of 0.40 per cent. The bonus interest if your balance increases by at least $200 by the start of the month is 2.25 per cent, bringing it to a total of 2.65 per sent. The monthly earnings would be $2.17.
Finder says you can also earn compound interest on your savings account balance.
“Compound interest is when interest is earned on your balance, and on the interest you’re earning. This is different from simple interest when you earn a set rate of interest on the principal (amount invested) only.
It’s worth noting that savings accounts are a low risk investment compared to something like stocks. It’s alsoprotected by the Australian Government’s financial claims scheme on deposits up to $250,000.