The 5-minute move that could boost savings by up to $1,968 in a year

Australians with money in the bank are finally starting to see some decent rates on their deposits after seven RBA hikes. However, not all savers are being treated equally as banks pick and choose which accounts to reward with higher rates.

Australians have a record $1.32 trillion in household deposits, according to the latest APRA statistics, but many savers are earning less than 1 per cent on their hard-earned cash, including existing customers with a Westpac’s eSaver and ANZ’s Online Saver account.

However, seven banks are now offering ongoing savings rates above 4 per cent. Note this excludes kids accounts.

How much interest are big bank customers missing out on by having their savings in a dud account?

RateCity.com.au analysis shows that an existing big four bank customer with $50,000 in an online saver could have earnt an extra $880 in extra interest over the last 12 months if they’d had their money in the market-leading account, assuming they met the monthly terms and conditions for this account. These calculations are based on a $50,000 balance and do not factor in any additional deposits a person may have made.

Looking forward, if this person moves $50,000 into a market-leading account at the start of next month, then they could potentially earn up to $1,968 in extra interest, assuming they meet the bank’s terms and conditions. These calculations are estimates and assumes the cash rate reaches 3.85 per cent, as forecast by Westpac and ANZ and that banks continue to pass on similar rate increases as they have previously on these specific accounts.

Interest earned – last 12 months

Source: RateCity.com.au. See notes below

Potential interest – next 12 months

Assumes cash rate reaches 3.85% and each rate rises in line with previous hikes.

Source: RateCity.com.au. See notes below

RateCity.com.au research director, Sally Tindall, said: “Millions of savers have missed out on hundreds, potentially thousands of dollars in interest by loyally sticking with their bank.”

“Some savings customers are still on interest rates below 1 per cent, which is ludicrous when the cash rate is 2.85 per cent and the market leaders are now paying 4 per cent and over,” she said.

“You might be kicking yourself for not acting sooner, but it’s not too late to switch and start earning a decent amount of interest.

“Even switching savings accounts within some banks could quadruple or even quintuple a customer’s rate.

“For example, existing Westpac eSaver customers are still only getting a rate of just 0.85 per cent, yet the bank is offering Reward Saver customers an ongoing rate of 3.50 per cent.

“Meanwhile, ANZ is paying existing Online Saver customers a rate of 0.60 per cent, yet from tomorrow, the bank’s Plus Save customers will be earning a rate of 3.50 per cent.

“The banks are now willing to offer proactive savers decent rates but they’re still dramatically short-changing complacent customers who have their money in dud accounts.

“Savers earning less than the cash rate should consider voting with their feet. Banks need deposits to help fund their home loans. The more people switch, the more likely the banks are to chase customers with decent rates.

“Don’t let the admin of switching banks put you off. Find a savings account that suits your finances and pays a decent rate of interest. Once you’ve landed on the right account, opening it up can take as little as five minutes,” she said.

Tips for opening a new savings account

1. Compare rates: Not all savings accounts are created equal. Look at what rate you’ll be getting on an ongoing basis and make sure you can meet any terms and conditions easily.
2. Beware of introductory rates: Some accounts offer new customers a high rate for the first three to five months, after which time the rate often plummets. Unless you’re planning to switch accounts regularly, you might be better off looking for a different account.
3. Have your documents ready: Most savings accounts will require an official ID (such as a driver’s licence or passport) and your Tax File Number.
4. Fill in the application: The form isn’t likely to ask you anything overly complicated, typically it will ask for your full name, date of birth, email address and phone number.
5. Start saving: Consider setting up a direct debit into your new savings account to help you save.

Highest ongoing savings rates on RateCity.com.au

Source: RateCity.com.au. Monthly conditions apply for max rate.

Big four banks savings rates – post November hike

Notes: Calculations are estimates based on the deposit size and do not include any additional deposits. The big four bank online saver rate is the average of the ongoing rates for each product. Assumes terms and conditions are met to receive the maximum interest for the highest ongoing savings account. Future calculations are estimates and assume the cash rate reaches 3.85% as forecast by Westpac and ANZ and that each bank passes on the average of the proportion of hikes made across the previous seven RBA hikes on each account.

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