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:

• Transaction accounts

  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.

• Minimum deposit

  Look at the minimum deposit not only for opening the account, but also the minimum amount to start earning interest.

• Fees and charges

  Naturally, 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.

• Convenience

  Several 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 backing

  Open 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 spend

  Saving 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.