Opinion
Savers, rejoice: You can now get high rates without the hurdles
Nicole Pedersen-McKinnon
Money contributorAmid all the talk of official interest rates potentially going down, something slowly, silently has been happening to savings rates: they’ve become not only higher, but hurdle-free.
The trend of the past decade has been savings accounts that require you to dance naked under a full moon and/or give up your firstborn to qualify for the full possible dose of interest.
Savings accounts no longer require you to give up your firstborn to qualify for a high-interest rate.Credit: Dominic Lorrimer
Some accounts have conditions so onerous – on which you are judged before they pay interest each month – as to be impossible.
Real conditions, rather than the above, made-up ones, often include depositing a particular amount of money each month, making five purchases, making no withdrawals, or even giving 30-plus days’ notice before you can access your own money.
Growing your account balance is one of the most common, overarching ones. It’s all because these hard-to-hit criteria mean institutions can advertise a high rate but frequently get away with paying less.
It’s transparent – I’m not saying otherwise. But the product design is all about getting the product into top-10 tables while spruiking a probably unlikely interest rate.
You no longer need to put up with: interest rates that time out; caps on what you can save; or pesky full-payment conditions.
But here’s the thing: guaranteed high rates now smoke the conditional ones. Or almost.
Accounts on which there is only a base rate, and not a base and then bonus component, have crept up those top-10 tables – and you don’t have to do anything to be paid all the promised interest.
Spend what you want, how you want, with the frequency you want. Stash or splash your balance, it doesn’t matter: the rate you see is the rate you get. Happily, in a cost-of-living crisis, there is no need to grow your balance each month.
Best among the base-rate accounts is Australian Unity’s Freedom Saver, with 5.2 per cent, says data house Mozo. This is now just a whisker behind ING and MOVE Bank’s leading anyone-can-access, bonus-saver accounts, which pay 5.5 per cent.
Note that, without another deposit institution paying as much, MOVE cut its highest-possible savings rate by 20 basis points last month – for a heartbeat it paid 5.7 per cent.
But you might miss out on the 5.5 per cent in some months as MOVE’s qualifying conditions are to make a minimum deposit of $200 and no withdrawals in that month. It’s a straight savings account and not for transactions.
Meanwhile, the hoops you need to jump through with ING are to deposit at least $1000 into a personal ING account, make at least five settled card purchases using the linked ING debit card, and grow the account balance (excluding interest) higher than it was at the end of the previous month.
That might be all well and good for you. But I take particular issue with bonus-saver, contingent-upon-your-actions accounts when it comes to kids. And there are a few targeted at this market.
Young people should be focusing on goal setting and learning assiduous allocation of their money, not convoluted conditions that are sometimes counter-intuitive to that. (Saving and then spending is good – that delay in the dopamine triggered when you buy something you want is what makes for a smart future money manager.)
I prefer an account where there is a reliable payback for a child depositing their pay or pocket money.
Great Southern Bank’s Everyday Youth Saver ticks all these budgeting boxes. It offers guaranteed interest at 5.5 per cent.
The way it can pay a rate so comparatively highly is by capping the eligible balance at $5000, which is a nice car-sized or gap-year-sized amount. A number of adult accounts set a ceiling on savings that attract the best rates, too – $250,000 is common.
And if you are looking for a long-term return, check any impressive interest rate doesn’t expire, say, after four months.
It was previously smoke and mirrors but you no longer need to put up with: interest rates that time out; caps on what you can save; or pesky full-payment conditions – base rate accounts now smoke the rest.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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