Are savings accounts free?

They say there’s no such thing as a free lunch, and the same can be said about savings accounts.

While many savings accounts in Australia will not sting you with ongoing monthly fees, you’ll still potentially have to jump through hoops to keep your account and earn the highest bonus rate.

So, can a savings account ever truly be free? And how do you ensure your savings account is working its hardest for your rainy-day fund? Here is everting you need to know about keeping costs down on savings accounts.

Is a savings account really free?

At the end of the day, a savings account is still a financial product offered by a provider. These providers, whether traditional banks or online competitors, need to make money.

While your savings account provider cannot necessarily charge you interest for having an account, like one would with a loan or credit card, it can earn its profits from charging you fees and ongoing costs.

Typically, the older financial institutions will carry greater fees and lower interest rates. Newer, online-or-app-based providers are able to keep overheads low by not paying for expenses like branches, and therefore generally offer higher interest rates and lower fees. This is not a hard-and-fast rule and can depend on the institution and the type of account. But it is worth keeping in mind when doing your savings account research.

What savings account fees are there?

There are a range of savings account fees you may he hit with, depending on your provider and the account type you choose. These include:

• Account keeping fees
• ATM fees
• Withdrawal fees
• Overdraw fees
• Foreign transaction fees, such as currency conversion fees 

You may be hit with one more of these fees for transferring, withdrawing or direct debiting your savings.

If you’re unsure just what fees you may be facing with your current savings account, hop online and take a look at your providers’ website. There you’ll be able to see the Product Disclosure Statement (PDS), which should outline any potential fees and costs, as well as the base rate and maximum rate earned on your account.

What other ‘costs’ can a savings account have?

It’s not just fees that you’ll need to look out for with a savings account, but the other ways your provider will make you pay for your account - aka conditions. Jumping through various hoops for a savings account provider is one way you ultimately have to “pay” for your account, regardless of the fees charged. 

Some savings accounts come with conditions that need to be met by the account holder in order to receive the highest bonus interest rate possible. While you can simply ignore these conditions, or just look to introductory savers with low base rates and no bonus rate criteria, you may miss out on the most fundamental part of a savings account: earning a high return.

The highest interest rates are reserved for savers who meet all of a provider’s conditions. These may include:

• Depositing a minimum amount each month into your savings;
• Keeping your savings balance above a minimum amount;
• Making no withdrawals or direct debits to your savings;
• Having linked financial products, such as everyday transaction accounts; and
• Keeping minimum balances or account deposits each month in said linked accounts. 

By opening linked transaction accounts with your provider, you’ll also run the risk of being stung with a whole new raft of fees for said transaction accounts. Further, to meet some conditions, you’ll effectively need to overhaul your entire personal finances, such as having your income deposited into your new linked bank account, setting up direct deposits each month into your savings account and budgeting accordingly.

While these conditions aren’t necessarily a difficult thing to meet, you are still paying for your savings account by bolstering the providers books by opening more accounts and keeping a higher account balance than you otherwise would have.

How do I keep costs as low as possible on my savings account?

With all that being said, there are ways you can keep costs low on your savings account. This includes: 

• Introductory (standard) savings accounts

This type of savings account does not typically come with conditions that need to be met. You will earn a competitive rate for a set period of time at the start, but your interest rate will then revert to a lower, standard variable rate for the time you have the account. This is a more set-and-forget kind of savings tool.

• Do your research

One of the best ways to keep fees low and choose manageable conditions is to do your research before choosing a savings account. Simply staying with the same account you’ve had since you were a kid may mean you’ve never done your due diligence about checking for fees or even seeing if there are higher interest rates available on the market. 

Use comparison tools, such as tables, to filter down and compare savings account options. You’ll be able to expand the ‘more details’ section to see a breakdown of any potential fees charged. As many accounts charge minimum, if any, fees at all, this is a helpful way of weaning out high-fee accounts. 

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