Compare savings accounts with bonus interest rates

A savings account with a bonus interest rate can be a great way to take advantage of a higher interest rate and get a greater return on your savings. To incentivise you to upsize your saving, the bank will set certain conditions on the savings account. If you meet the minimum deposit and withdrawal conditions, you’ll be rewarded with a better interest rate. The added bonus is that the interest compounds over time, which means you’re earning more for doing less.

How do savings accounts with bonus interest rates work?

A savings account with a bonus interest rate works like a regular high-interest savings account, except that there are generally a few conditions attached to the account. In exchange for meeting the conditions, the account may have an additional bonus interest rate that can help you reach your savings goal sooner.

It’s worth noting that bonus rates are generally temporary, which means that after a period, the bonus rate will revert to a normal base rate. When you’re comparing base rate accounts, always look for what happens when the honeymoon period ends.

Depending on the bonus and the account, bonus interest savings accounts help you grow your nest egg by adding compound interest to the money you deposit. In most cases, compound interest is calculated daily and paid monthly into your account. The amount of compound interest you earn depends on your account balance, and more importantly on your interest rate. If the savings account offers you a bonus interest rate, on top of the base rate, you’ll earn more interest on your savings. Because the interest compounds, you’re essentially earning interest on the interest you’ve already earnt, and over time, this can snowball.

Because the bonus rate is mostly conditional, if you haven't met the conditions for one month, you’ll forfeit the bonus for that month only. Assuming you make no or few withdrawals, savings accounts that offer bonus interest rates can help you grow your savings faster than regular savings accounts.

How to compare savings accounts with bonus interest rates

There’s no one-size-fits-all bonus rate savings account. Every bank and account type have their own conditions and version of bonus.

An introductory bonus rate is a promotional interest rate that’s valid for a short, fixed period. After the intro rate expires, the account will revert to the regular base rate. This type of introductory bonus is best suited to those looking for a short-term savings boost.

For savers looking for a longer-term solution, accounts offering conditional bonus rates tend to have higher rates over a longer period. Conditions may include making minimum monthly deposits or not making a withdrawal in the monthly period.

There are also some savings accounts that offer bonus rates for children’s accounts. If you’re looking to give your child a head start on their savings, these accounts usually have lower monthly deposit requirements.

Features of a savings accounts with bonus rates

When comparing savings accounts with bonus rates, pay attention to the base rate as well as the bonus rate. At the end of the day, you’re looking for an account that gives you the best return on your investment, during and after the bonus period.

Other aspects to consider are account fees and length of bonus period. You’ll also want to check what your options are for accessing the account and withdrawing funds if and when you need to.

Once you’ve compared the different savings accounts with bonus rates, applying is relatively simple. In most cases, you’ll be able to apply for a savings accounts with bonus rate online, without needing to go into a branch. To apply for a savings account with bonus rates, you need to be an Australian citizen, provide proof of ID and your tax file number.