Last week one of the big banks announced they were slashing the interest rate for some of their customers’ savings accounts, unless they meet new conditions. If customers deposit the minimum amount speculated, they will receive the top interest rate for their savings every month. If they don’t, they will only receive the minimum rate (around 10% of the top rate).
This might seem quite a big issue, particularly in the current realm of rising interest rates and general feel of distrust towards banks. But this is quite common when it comes to savings accounts, particularly in times where interest rates are high.
Whilst some savings accounts have no strings attached, others can have a few conditions. They may require you to deposit a certain amount and/or make no withdrawals each month. They can have higher “welcome rates” that can stop after a few months. They can even require you to open a transaction account with the same bank (and even have a certain amount being deposited into that each month!).
These conditions can be a small part of the reason why interest rates for savings accounts are more varied than those for home loans.
Why should this be an issue? Those who can put away the required amount each month won’t have a problem with meeting these sorts of conditions. In turn, they will be rewarded with a high level of interest being paid back onto their balances.
But what about those who may be struggling financially? These people may not be able to put in the amount required every month. They may need to dip into their savings on a regular basis to pay bills or emergency expenses. To them, it might feel like they are being punished.
How can you get the most out of your savings account, no matter your situation?
If you’ve had your account for a while, it might be a good idea to check the details and conditions of your interest rate. Savings accounts, even though you’re actively putting money in, can become “set and forget”. But if your bank no longer offers your type of savings account (check out your bank’s website to see if your account is still there), it’s possible you haven’t been getting any interest rate increases that have happened over the past while applied to your savings rate.
Once you know your interest rate and any conditions around it, you can use it to compare other savings accounts products on your bank’s website. If you don’t like what they’re offering, you can use a comparison site such as Canstar or finder to see if there’s a better fit for you elsewhere.
If you think you’ll struggle to meet the monthly deposit requirement, consider switching to an account that doesn’t have this as a requirement. The interest rate may be a little lower, but the overall interest you get paid could leave you better off.
One of the only pieces of good news when it comes to high interest rates is that savings accounts are now offering rates that could make a difference to your balance. Don’t stick with the old if you can a better match somewhere else!
