Compare Savings Accounts
With the sheer number of options available, it can sometimes be difficult to find the right savings account. To make your search easier, we've prepared a guide on how to compare savings accounts.
Step #1: Decide what type of savings account you need
There are several types of savings accounts, and while some of them may seem similar, each type of account will offer you a variety of different features, interest rates and costs which you should be aware of. You first need to decide which account type will best suit your financial position. Here are the most common types of savings accounts currently available from banks and credit unions:
These accounts provide frequent, on-demand access to funds through a variety of channels. These accounts don't really function as savings accounts and are designed specifically for convenience and everyday use.
- Regular savings accounts
Sometimes called passbook savings accounts, "regular" savings accounts are the most basic type of bank account designed for customers looking to save. These accounts typically have low balance requirements, no withdrawal limits, and minimal fees, but have low interest rates.
- Online/high-interest savings accounts
Online accounts traditionally offer higher interest rates, and usually have minimal or no fees and balance requirements. However, they generally need to be linked to another account in order for you to access your money. For example, you could link your online savings account with your debit card, and transfer funds when needed.
- Incentivised savings accounts
These accounts offer a higher interest rate when you deposit a certain amount of money on a monthly basis. If you want to maximise your savings with this account, you are also limited to how much you can withdraw on a monthly basis. Incentivised accounts aren't necessarily different from the other types listed here. For instance, some online, student and children's savings accounts may offer similar saving incentives to those just mentioned.
- Term deposits
This type of deposit earns a specific interest rate over a specific time. The rates are usually higher for longer terms, but the funds normally cannot be accessed during this period.
Step #2: Compare the features individually
Once you know what kind of account you want, you can now compare their features individually. Here are the things you need to watch out for:
- Interest rate
It may be tempting to get the account with the highest rate, but there are other factors to consider:
- Introductory rate
Some banks offer a high introductory rate but it lasts for only a few months.
- Standard rate
This is what you need to look at when searching for an account with the "best" rate. Once the introductory period ends, the interest rate reverts into the standard rate.
- Tiered interest rate
Some accounts have tiered interest rates, which means you earn them if you reach a certain balance.
- How interest is computed
Find out if the interest is paid for the entire balance once your money reaches a certain amount, or if it's paid on the part of the balance that reaches the amount.
- Withdrawal based interest rate
Some accounts earn interest only if you refrain from withdrawing for a certain period.
- Introductory rate
Minimum depositLook at the minimum deposit not only for opening the account, but also the minimum amount to start earning interest.
Fees and chargesNaturally, you should look for accounts with no fees. However, don't rule out those with minimal fees--they might come with useful features that you need.
ConvenienceSeveral factors come to play in convenience: the proximity of branches and ATMs from your home/office, the number of facilities overall, and the range of products and services offered. Consider the account and institution that offer the least amount of effort and time to access.
Government backingOpen your account in a bank or credit union that's backed by the Australian government so that in the unlikely event that the institution fails, you can get back $250,000 of your deposits.
Tips comparing savings accounts
Know yourself when comparing interest rates
Some accounts offer higher rates, but you may have to deposit a certain amount, refrain from withdrawing, or deal with a temporary rate. If you think you can meet the conditions, or have the time to shop around and transfer, then open the account. Otherwise, avoid bonus rates and find an account with the highest, most stable rate. It is important to ask questions about the interest rates offered by various instututions before you choose your savings account.
- Look at the fee structure
See how the fees add up. They may not seem like much on paper, but can accumulate quickly in practice--and this can whittle away your hard-earned savings.
- Beware of freebies
Don't be lured into opening an account for free items like toasters or iPods. There's usually a catch down the road, or perhaps the services aren't what you wanted.
What you don't see, you don't spendSaving for something? Look for an account with an automatic savings plan, which automatically deposits a fixed amount at another account, making it easier to save.