What to look for when choosing a savings account

Many people think the interest rate is the be all and end all of savings accounts, but the other features can be just as significant.

While interest rates are important, these come with all sorts of conditions that can make the account seem less attractive.

Savings accounts can also include a range of positive and negative features that can further influence how you value them.

With that in mind, here are five things to consider when choosing a savings account.

1. Interest rate

The interest rate is the logical place to start when weighing up savings account options. But you need to be careful not to take headline numbers at face value.

First, the advertised rate might be an artificially high short-term figure that soon reverts to a lower rate. Second, you might get that rate only if you meet conditions involving the size of your account balance or the number of deposits and withdrawals you make per month.

2. Fees and charges

The next thing to look at is fees and charges, because these can quickly eat up whatever interest you’re being paid.

Typical levies include account-keeping fees, withdrawal fees and minimum balance fees. You might also be slugged if you overdraw your account or request paper statements.

3. Accessing your money

It’s important to know how quickly and easily you can get your money.

So one question to ask is whether the lender has a free-to-use ATM near your home or office. Another question is whether there’s a nearby branch you can visit. You might also want to find out the working hours of the call centre in case you need to discuss a problem.

4. Opening deposit

Some lenders won’t accept your business if you can’t deposit a certain amount of money when you open your account. Others will, but will pay you a lower rate.

5. Government guarantee

A small number of people will be confronted with the opposite problem – not to deposit too much money in their account.

Under the federal government’s Financial Claims Scheme, deposits under $250,000 are protected for each account holder at each lender that is incorporated in Australia and authorised by APRA.

If you need to deposit more than $250,000, you should do so at multiple lenders, so that all your money is covered by the government guarantee.

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