Savings accounts hit 6%, but there's a big catch

Interest rates on deposit accounts are the highest they've been in 15 years, but you might not be eligible for the best deals.

The four interest rate hikes handed down by the Reserve Bank so far this year have, without a doubt, hurt borrowers.

But every cloud has a silver lining and in this case it's a bonus interest windfall on the more than $1 trillion Aussies hold in bank savings and deposit accounts.

Savers who have stuck with these products over the years would have weathered times when the annual return on deposits was as little as 1%.

But the Reserve Bank's monetary tightening has now pushed savings rates on some accounts to 6% for the first time in 15 years.

Which accounts are paying the most?

According to Canstar, ongoing rates broke the 6% threshold last week, when Bank of Queensland (BOQ) and Newcastle Permanent readjusted two of their savings products.

Newcastle Permanent's 25 basis point boost to its Smart Saver account means a customer will earn an extra $50 in interest over a year on a $20,000 deposit.

ING, Revolut and Rabobank have also lifted rates to 6% or even more, but only for new customers and only for the first few months after an account has been opened.

What's the catch?

Seeing these newly-revamped savings offers, you'd be forgiven for wanting to move your money right away.

But a lot of these deals aren't as good as they seem and some you might not even be eligible for.

"Saving accounts seem simple on the surface, but they're anything but," warns Sally Tindall, data insights director at Canstar.

"Pay attention to the fine print, because banks are increasingly wrapping their rates up in conditions designed to catch at least some savers out".

1. Time-limits

As mentioned above, some accounts will only pay you 6% for your first few months as a new customer.

After this, rates drop to an ongoing offer, which will be lower than what you could be getting elsewhere.

2. Age restrictions

BOQ and Newcastle Permanent are the only banks currently offering 6% interest on an ongoing basis.

But the only way you can earn this at either is by opening an account while you're young.

For example, BOQ's Future Saver account is only available to people aged 14-35. Once you turn 36, it converts to a Smart Saver and the interest rate falls to 5.65%.

Newcastle Permanent is even more strict, cutting off eligibility for its Smart Saver account at 24.

Once you turn 25, the annual rate of return drops 100 basis points to 5%.

Tindall says younger Aussies are an increasingly popular target market for these institutions.

"Banks are offering attractive rates to this demographic in the hope that they then go on to take out more banking products, [potentially] something as big as a home loan".

3. Monthly conditions

Even if you're the right age to open an account, you'll still have to meet a checklist of conditions every month to get 6% on your deposit.

Across both banks, these include:

-Depositing up to $1000

-Making at least five eligible purchases

-Growing your account balance

4. Balance limits

Once you've met these conditions, the banks also put limits on how much money you'll be able to earn that 6% on.

For both BOQ and Newcastle Permanent, it's $50,000 and any amount over this in your account will earn interest at a lower rate.

This is where time-limited offers and accounts from the big four banks have an advantage: they're less likely to put such limits on their deposit products.

What are the big four doing?

The big four banks have also hiked savings rates, but most of their offers still languish behind those of their newer competitors.

Even then, they require depositors to meet a web of monthly terms and conditions.

If you can't achieve these, they might only pay you a measly 0.01%.

How to get the best savings deal

Choosing the right savings account starts with reading the fine print, says finance expert Professor Angel Zhong from RMIT.

"The headline savings rates could be quite attractive, but always read the terms and conditions," she says.

Check if you'll be required to make a certain number of monthly deposits or card purchases and if you're allowed to take any money out of the account to cover sudden expenses.

"Before signing up, think about these conditions and be realistic about whether you can meet them every month," Professor Zhong adds.

Consider these requirements carefully: if you fail to meet them, your rate might be cut to lower than what you would be getting in a condition-free account.

Short-term savings hack

Time-limited savings offers are often a source of frustration for anyone wanting to see their deposit grow substantially in the long term.

But they can be helpful if you're looking for a quick savings boost.

For example, set up a savings account with a brand like ING or Revolut to take advantage of their generous four-month, 6.25% deals.

Once the introductory offer expires, look at transferring your savings to an account with a better ongoing rate.

"Sometimes you can switch to benefit from different introductory offers," Professor Zhong says.

"If you're signing up for a new deal, just put the date it will end in your calendar so you remember to move your money."

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