Choosing a high interest savings account to house our savings should be quite straight forward. Unfortunately however it isn’t as simple as one would lead you to believe. To hunt down the best deal and ensure your money has the best possible rate/chance to grow, you need to be aware of a few things.
Here is how to select the best high interest savings account for your needs.
Beware of headline interest rates or introductory rates
Often a high interest savings account will have an introductory or new customer rate. They use this inflated interest rate to lure people in & seem like the best option, though in the fine print explain that the actual rate will revert back to normal in a few months.
Look for an account that has ongoing high interest, a few months of introductory rates will do very little for your savings.
Do you want a high interest account that is integrated to your banking?
If you sign up to a high interest account with your everyday banking provider, odds are the account will be visible in your internet banking. Is this a good thing? For me it wasn’t – having it visible means I can easily take money out of it at the drop of a hat.
Seperating your high interest account means that it is harder to get the money back (not really harder, just takes a few days) and you can also let it grow on auto pilot to slowly but steadily see progress.
Tiered interest rates, understand them
Many high interest accounts now have tiered interest rates and bonus rates. This means that you need to deposit certain amounts in your account before accessing the better rates.
Be sure to check you are able to achieve these bonus rates via deposits before signing up. No point going with a provider who has a high rate that you won’t be able to access due to your own circumstances.
Are your savings safe?
When choosing a high interest account, safety should be a key concern. Safety against getting hacked, safety against all of your money going under with the provider you choose.
Look to go with a bank or credit union that offers the Government guarantee for deposits up to $1 million dollars.
Popular high interest savings accounts
Here are the most popular HISA’s available on the market.
ING DIRECT Savings Maximiser
Earn a good % of interest on your money right away.
The ING DIRECT Savings Maximiser is the original high interest savings account. It is well known for having competitive rates, no fees and backed by big bank security. Many readers of Savings Guide tell me they bank with ING Direct.
Learn more about ING Direct Savings Maximiser .
Ideal for St.George customers who want immediate access to money.
The St.George Maxi Saver is a high interest account that is visible in internet banking (for St.George customers). The St.George Maxi Saver offers competitive rates and can help savers who already bank with St.George by limiting the down time it takes to transfer money from one account to another account (wasted days in transfer means less interest) as customers can transfer money between their everyday acunt and the Maxi Saver instantly.
Learn more about the St.George Maxi Saver.
ANZ Online Saver
Quick access to money for ANZ customers wanting a savings account.
The ANZ Online Saver offers competitive interest rates, a big bank peace of mind, no minimum balance and like other banks – gives you access to your money 24/7, 365 days a year through online banking.
You can setup multiple ANZ Online Saver’s to seperate your different savings plans.
Learn more about the ANZ Online Saver.
High security for your savings
The RaboDirect account is quite unique. They offer advanced security measures to ensure your money is tightly locked away, something that is very handy for those of us who cannot resist the urge to splurge!
I know that a lot of people look to RaboDirect to store money they don’t want to touch for over 12 months – simply because of how secure it is and that it isn’t connected to your everyday banking partner.
Learn more about the RaboDirect High Interest Savings Account.
HSBC Serious Saver Account
International bank, competitive rates upfront rate.
No hidden fees, no monthly catches. HSBC is an international bank with an international reputation. People with family overseas and sophisticated money requirements often turn to HSBC as their banking partner.
Learn more about the HSBC Serious Saver Account.
The online savings account backed by NAB.
There is something really cool about UBank. It’s backed by NAB and often gives the best possible rates in the market. They are no frills, to the point and focused on high interest savings.
Learn more about the UBank Usaver.
An interest tip to help you with your savings
Recently a tip was submitted by Gerd Schenkel, the General Manager of UBank, a direct bank in Australia that is backed by NAB.
He shared with us a very insightful tip worth considering when setting up a term deposit or high interest bank account.
He stated that when considering a new account (savings account, term deposit or other investment), it is important to consider how many days it will take to set up the account and to transfer your money. If your money has to site in a non interest bearing transaction account for, say 5 days to wait for paperwork to clear, then this can have a dramatic effect on the effective interest rate you are getting.
What does this mean for your cash?
For a 90 day term deposit at 4% p.a. interest, a 5 day delay reduces the effective interest rate to 3.78%.
As you can see, you may find a high interest rate for your money, but unless you have the cash in that account for EVERY day of the term deposit from day one, you will be getting a lesser return than originally thought.
This loss on transfer may change your selection of accont, ie you may prefer an account with a slightly lower nominal interest rate, but with a faster set up process.
The 101 on high interest saving accounts
According to Choice, half of the money banks have at their disposal to lend to borrowers comes from deposits. Which is kind of grating, when you consider how loath they to pass on any changes in interest rates to those depositing money, and how quick they are to pass them on to anyone with a mortgage. Certainly, a buck each way.
Now might not seem like the best time to be looking at savings accounts with interest rates low. But, for most people, a saving account is a part of their financial set-up. Either as a cash option, risk mitigator or, as it is for me, an emergency fund. It’s guaranteed by the government, accrues interest at a higher rate than an everyday transaction account and completely liquid and available should you require it, without penalty. There are catches, however, and some ways to capitalise on your savings. Here’s how.
Transaction Versus Saving
Transaction accounts are a necessary part of every day life. While they might ostensibly have decent interest attached to them, with money constantly going in and out, you’re unlikely to see much interest at all as a result. Look for low fee accounts, and if the interest looks impressive, check to see what you need to do to earn it. Instances, as in savings account, would include keeping a certain balance or maintaining a low level of withdrawal.
Savings accounts are generally attached to your transaction account and can be managed online. They offer a higher rate of interest, and a geared around saving behaviours.
A Certain Balance
When looking at savings accounts, it’s important to note what balance is required before interest is paid. Sometimes it’s $1,000, $2,000 or $5,000 and you’ll need to be aware of what the base level is, otherwise your money could end up garnering no interest, while you think you’ve landed yourself a nice savings account. Generally, the account will need to stay above a certain level in order to earn the high interest.
Deposits And Withdrawals
Banks set up savings accounts so they have a general idea of what money would be coming in. Thus, it has to be maintained at a certain balance, with a restriction on withdrawals and an obligation to contribute. Generally, you’re looking at one withdrawal a month and a minimum deposit rate, which seems to often sit around $100- $200 a month. Not fulfilling those obligations loses your interest for the period.
Choose Your Savings Account Wisely. Beware Of Fees.
Both Choice and Caster suggest the Bankwest Hero is a good option as a savings account. It can function as a transaction account, paying a relatively high level of interest on balances up to $5000. Monthly fees are waived if more than $2000 is deposited. NAB’s Cash Manager was also highly rated by Canster. Remember to take into account the fees- if you’re paying $5 a month of account keeping fees, then that equates to 3% interest annually, taking a significant proportion out of your interest. Look for an account that suits your saving schedule and waives fees.