Why it's worth shopping around for a new savings account right now October 9th, 2022
The turmoil in world financial markets is dishing up a few surprises that should delight investors looking for an ultra-safe, short-term home for their savings. One major Australian Bank now offers an extraordinary 3.7 percent per annum for a 4-month period, with the money available at-call.
Macquarie Bank has lifted the introductory rate on its online savings account to 2.75 percent per annum with a promotional rate of 0.95 percent for the first four months. Add the two rates together and you end up with 3.7 percent. According to canstar.com.au, the closest online alternative to that rate is 3.6 percent offered by the Dutch based ING Direct.
These rates are for people of any age but for younger investors between 14 and 35 years of age, rival Bank of Queensland, will pay up to 4 percent per annum for a similar introductory period. Investors happy to tie up their money for longer can obtain a rate of 3.7 percent per annum with AMP Bank for an 11-month term deposit.
The Big 4 banks are well out of the race, offering term deposit rates between 1 and 1.8 percent for similar terms, and they’re also losing online savings account customers. Online offerings from the big four for people over 35 top out with Westpac at 2.35 percent.
In the case of Macquarie, the bonus rate is limited to deposits of up to $250,000 with the only condition being that a transactional account is opened alongside the savings account.
There are no account fees associated with the transaction account. If a person maxed-out the offer with a $250,000 deposit, the amount credited to the account by the end of the 4-month period would be $3,083. Like other online honeymoon savings accounts, once the 4-month period has expired, the crediting rate reverts back to the base rate which in this case, is 2.75 percent.
While some honeymoon accounts require regular savings or transactions, these conditions don’t apply in this case. The surprising rate comes off the back of soaring interest rates worldwide and low operating costs. Online banks have no costs associated with opening and staffing branches. And despite operating exclusively online, your money is safe.
Like all accounts with Authorised Deposit-taking Institutions or ADIs, these accounts are backed by the Government’s Financial Claims Scheme which guarantees the first $250,000 per account holder per institution. ADIs include all banks, building societies and credit unions. A couple, for example, could invest up to $500,000 that is backed by the scheme by opening a $250,000 account each.
Experts believe the bonus rates offered to investors reflect anticipated rate rises over the next few weeks. The overseas pressures combined with the need to kill-off inflation have forced the Reserve bank to lift interest rates.