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Banks paying savers a pittance despite record rate rises
By John Collett
Dozens of “saver” accounts, including some of those offered by major banks, are paying those looking for somewhere safe to put their money a pittance in interest, despite a record run of rises that has seen the cash rate soar to 4.1 per cent.
As the cost of living surges, interest on deposits is an important source of income for many, yet there are 20 saver accounts currently on offer that pay an ongoing interest rate of less than 1.6 per cent, with six of those paying 0.6 per cent or less.
Dozens of “saver” accounts, including some offered by major banks, are paying customers a pittance in interest despite a record run in rate rises.
Some of these have “intro” rates where they pay a higher rate for the first three to five months before falling to the low ongoing rates.
The figures from RateCity, based on a balance of $50,000, come as the Australian Competition and Consumer Competition (ACCC) is in the midst of an inquiry into retail deposits and will report its findings later this year.
The Albanese government tasked the ACCC with looking into why increases in the cash rate are generally passed through to interest rates on variable home loans, in full, but the increases on deposits are often smaller.
There are also savers where, if the conditions of the account are met, such as growing the balance each month, a bonus rate is paid. However, there are nine conditional accounts that pay zero per cent and more than a dozen that pay a base rate of only 0.01 per cent.
While the stingiest payers are found among the smaller lenders, it is the big banks that are the largest holders of deposits, with about 73 per cent of all household deposits.
Among the big banks, ANZ saver accounts feature some of the lowest interest rates. ANZ Online Saver has an ongoing interest rate of 1.6 per cent, with an intro rate of 3.4 per cent for the first three months.
ANZ Progress Saver has a base rate of 0.01 per cent – one of the lowest base rates in the market; though, if conditions are met, it pays 4.25 per cent.
A spokesperson for ANZ says the bank has a range of deposit and savings products to suit the different financial objectives of our customers. Its ANZ Plus saver account, for example, pays an ongoing rate of 4.65 per cent on balances of up to $250,000.
“Since its launch in March 2022 more than 250,000 customers have joined ANZ Plus and taken advantage of its competitive rate,” the spokesperson says.
Westpac’s eSaver has an ongoing interest rate of 1.1 per cent, one of the lowest ongoing rates in the market, with a rate of 4.75 per cent for the first five months.
A spokesperson for Westpac says its “flagship” Westpac Life savings account pays up to 4.75 per cent if the balance increases each month. If the balance is not grown each month the interest rate reverts to the base rate of 2 per cent.
Those aged 18-29 can earn up to 5.2 per cent on their first $30,000 of savings if Westpac Life is linked to a Choice bank account, and the debit card is used at least five times a month.
Sally Tindall, the research director at RateCity, says complacent savers who have been with their bank for some time are likely to be in saver accounts that pay a pittance. It is easy for savers to get caught out with conditional accounts, and miss out on the bonus rate.
Tindall says those who have been enjoying a high introductory rate which is about to end could always ask their bank to restart the intro period. “If you don’t ask, you don’t get,” Tindall says.
The best-paying saver account listed on RateCity’s database is the new ME Bank HomeME savings account, which pays an ongoing rate of 5.65 per cent for amounts of up to $100,000.
If you fail to meet the conditions, among which include growing the balance each month, the saver pays a base rate of 0.55 per cent.
The RateCity database lists more than 20 saver accounts that pay an ongoing rate of 5 per cent or more.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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