Best Savings Account award: Best of the Best 2020
GREATER BANK (BANK)
AMP (MAJOR BANK)
FIRST CHOICE CREDIT UNION (NON-BANK)
More players in the market means there are better deals for savers
Would you like to be $5, $15 or $27 better off each year with your choice of savings account? In this category, the total rate ranges from 1.55% to 2.75% at the top of the range, for a bank balance of $5000 or more.
But that is just the start.
The savings account market is going through an interesting time, thanks to new legislation that has opened up competition to a level unseen in previous years.
"The big banks have cut rates but the neobanks and smaller players are coming in and offering much better deals," says Jason Bryce, researcher
Savers really have to look at the ongoing bonus rate their account is paying and the rules around that.
"There are savings accounts paying well above inflation with easy rules, but mostly they are not from the major institutions," says Bryce.
This year's winner, Greater Bank's Life Saver, has a great rate, up with the best bonus rates in the market. This account must be opened before the customer's 25th birthday, but can be held for life.
"Greater Bank's rules for getting the bonus rate are not too stringent either," says Bryce. "You just need to increase your balance each month to get paid the bonus rate for that period."
Among the major banks, Bryce says the AMP Saver account has an excellent introductory bonus rate for four months, then a very competitive ongoing base rate.
"Savers really need to look past the headline bonus rate and introductory rates and make sure they are getting a reasonable ongoing base rate."
To this end, First Choice Credit Union scooped the non-bank category. "It has a good ongoing base rate on its online savings account," says Bryce.
Case study: playing the base rate vs bonus rate game
Income: $6000 a month
Expenses: $4000 a month
Savings: $2000 a month
Alison is playing the base rate versus bonus rate savings account game - she has to find an account that suits her lifestyle if she wants to get a reasonable interest rate on her savings.
She is saving for a deposit on an apartment, but she also has a life and occasionally needs cash for large purchases, such as her recent holiday in Bali.
The base rate play:
Alison has an account with a big bank that pays her a bonus rate (currently 1.25%pa) if she deposits at least $200 a month and makes no withdrawals.
Alison deposits $2000 every month, but over the past year she has made one withdrawal a month, meaning she was bumped back to the base rate (currently 0.01%pa).
Alison's year-end balance is $24,001.10, according to the InfoChoice Savings Calculator. She has made just $1.10 in interest.
The bonus rate play:
Alison finds an account that pays a bonus rate if she takes out a linked transaction account and uses it to buy something at least five times a month.
Now she is getting the bonus rate (currently 2.0%pa) and her year end balance is $24,221.
By taking a few minutes to compare rates and rules and select an account that suits her way of life, Alison has earned $221 in interest.
Case study source: InfoChoice