Compare savings accounts

Compare interest rates, fees, and key features for a range of online and high interest savings accounts in Australia.

By   |   Verified by David Boyd   |   Updated 30th October 2020

Comparing savings accounts

Overview

While you’ll find a variety of budgeting strategies and saving rules online, one thing is for sure: all adults should have savings. Saving is a necessary financial strategy, especially if you’re working towards short-term goals such as an upcoming wedding or a deposit for a home loan. Savings also provide necessary buffers during emergencies like medical bills or car repairs.

It’s also just generally a good idea to have extra money. The future is uncertain, and savings will give you that peace of mind that you’ll be prepared for whatever happens.

One practical way to start saving is to open a savings account where your money will not only be safe but will also grow at a steady rate thanks to interest. But knowing you should be saving and knowing how to choose a savings account that suits your needs are two different things. Read on to find out everything you should know before opening an account.

How savings accounts work

Much like a cheque or transaction account, a savings account is a bank account where you can deposit and withdraw money. However, unlike a regular transaction account, a savings account allows you to earn interest at a higher rate. So, in contrast to having your money sit idly in the bank, savings accounts can help you grow your money.

And unlike term deposit accounts, which don't allow you to touch your money for a set amount of time, savings accounts keep your money liquid – meaning you can usually deposit and withdraw whenever you need to, possibly by using a linked debit card.

Types of savings accounts

There are several kinds of savings accounts, and they can differ in terms of interest rates, fees, and required age for users. Here are a few of the most common types:

  • Online savings account. An online savings account is perfect for the tech-savvy saver who's constantly on-the-go. There are many different types of online savings accounts, from accounts issued by online-only banks to online accounts linked to transaction accounts set up with regular bricks-and-mortar institutions. The primary advantage of having an online savings account is getting to monitor your savings through a mobile app rather than having to find an ATM. Another advantage to having an online savings account is the potential for a higher interest rate and lower account fees since you don't have to pay for over-the-counter transactions and other bank overheads.
  • Bonus saver accounts. Sometimes, the thought of having extra money in the future isn't enough of an incentive to resist splurging. Instant gratification is a very common struggle for new savers. Bonus saver accounts help steer you away from temptation by offering bonus interest to those who can meet certain conditions, such as a limited number of withdrawals and a minimum deposit amount each month. If you're highly competitive and find challenges fun rather than restrictive, a bonus saver account could be useful for you.
  • Introductory interest rate account. Some banks may offer a higher introductory interest rate for simply opening an account. These higher rates last about three to six months, then revert to a lower interest rate afterwards.
  • Joint savings accounts. A joint savings account is simply a bank account that is shared by two or more people. Couples, relatives and business partners are the most common users of joint accounts, as maintaining one requires a certain level of trust and commitment. A joint savings account can either be accessed by any account holder without the need for permission from the other parties, or be accessed only with the written permission of all parties. Joint savings accounts are great for couples or families who are working towards a shared goal, such as saving up for a wedding, a home loan deposit, or a big holiday.
  • Children's savings account. A kids' or children's savings account is a savings account designed for children younger than 18. Children aged under 13 usually need parental or guardian consent to open an account. A children's savings account may come with a higher interest rate and lower account fees, to teach and encourage kids to save. There may be other bonuses or incentives too.
  • Pensioner savings account. These are savings accounts, often with a higher than normal interest rate, that help Australians over the age of 55 to save up for and manage their retirement funds. There are a few key features that set pensioner savings accounts apart, namely lower or non-existent account fees and a tiered interest rate system. Generally, the more a pensioner can deposit, the better their chances of having a saving account with higher interest.
  • Cash management account. A CMA is an account similar to a cheque or savings account. It allows account holders to manage their funds, make deposits, invest, and earn interest without the need for separate accounts for each purpose. It's a popular type of account for Self-Managed Super Funds (SMSFs) and small businesses.

Reasons for opening a savings account

Maintaining a savings account is a practical and relatively low-risk way to manage savings and grow your money over time. As mentioned, interest compounds, so you can earn more interest simply by depositing frequently and leaving the money in the account for longer.

Typically, people tend towards savings accounts when they have a short-term financial goal in mind, such as a big upcoming expense like a honeymoon or a car loan deposit. As well as these goals, there are three more reasons why savings accounts are worthwhile:

  • Savings accounts keep your money safe. There is no point in keeping your money stashed under floorboards or mattresses, especially if the alternative is a safe but easily accessible bank that rewards you for your savings. Plus, when you open a bank account with an authorised deposit-taking institution (ADI), your savings are guaranteed by the government for up to $250,000 if the bank collapses.
  • Savings accounts are convenient. If you open an account with a big bank, you won't be hard-pressed to find branches to deposit money into and ATMs to withdraw from. And if you've got an online savings account, even with a smaller bank or credit union, depositing and withdrawing are as easy as a few taps on your keyboard or phone.
  • You can link an existing transaction account with a savings account. Want all your money kept at the same bank? Want to be able to transfer funds from one account to the other without additional fees and a long waiting time? Most banks allow their customers to set up multiple accounts and link them to one another, so you can have a transaction account and a savings account that talk to each other.

What to consider when comparing savings accounts

Comparison sites and calculators are great tools for identifying the best, most practical bank and account for you – but not unless you know what factors to look out for.

  • Interest rate. First, make sure you're getting a good deal on your interest rate. Generally speaking, you will get a variable rate, meaning it will fluctuate over time. You might also be offered an introductory or honeymoon rate, which will typically be higher than the standard variable rate. Banks do this to entice customers into opening savings accounts. After the introductory rate period, your interest should move down to the lower standard variable rate. Be sure to check your contract to avoid the shock of your interest appearing lower than you expected.
  • Bonus rate. A bonus interest rate is a bank's way of rewarding you for meeting certain conditions, such as zero withdrawals within a month. A bonus rate is also often awarded to savings account holders who meet a specified minimum deposit amount each month. Some banks may also hold special promo periods for new and existing customers.
  • Fees. To make the most out of your savings, you'll want a bank that can offer a savings account with the lowest fees. Look out for banks that offer low to zero over-the-counter and electronic transaction fees, ATM fees and monthly account-keeping fees.
  • Customer service. If not banking online, always consider whether a bank has enough branches and ATMs near your home and your workplace. After all, you don't want to go out of your way just to make a deposit or a withdrawal. It's also a good idea to look up online reviews and find out what people love and hate about a certain bank, and consider whether these are important to you. You'll want to join a bank with good customer service, as you're entrusting large sums of money with these institutions. Make sure the bank you choose is responsive, accommodating, and puts their customers first. Sometimes it can be worth sacrificing a higher interest rate in order to get excellent customer service.
  • Minimum and maximum balance. Some banks impose a minimum maintaining balance on their account holders, meaning that they'll need to maintain a certain amount in their savings accounts or face a fee or reduced interest. It's also possible to have a maximum balance limit on your savings account, which keeps you from depositing beyond a certain amount. Check your bank's policies to make sure you can keep up with the balance restrictions.
  • Withdrawal limits. Even with high interest savings accounts, it will take time for your money to grow. So, you'll want to keep your money in your account for as long as possible to make the most of your interest. That's why some banks impose limits on the number of times and the amount of money you can withdraw in a month. If you think you'll need to dip into your savings now and then, you might want to open an account at a bank that offers savings accounts with both high interest and lenient policies on withdrawals.
  • ADI-registered. Lastly, always check to make sure that your bank or credit union is a registered Authorised Deposit-Taking Institution licensed by the Australian Regulation Prudential Authority (APRA). ADI-registered institutions are covered by a government guarantee that protects up to $250,000 of your savings in the unlikely event that the bank goes under.

The difference between savings accounts and term deposits

On the surface, savings accounts and term deposit accounts seem very much alike. However, there are a few key differences that set the two apart.

Much like a savings account, a term deposit allows you to deposit money into a bank account and earn interest while it's there. But unlike a savings account, where account holders are free to withdraw and deposit funds as they please, with a term deposit account you essentially lock your money away for a set time or term. You can only access your money once the term is over.

While this may sound restrictive, it does come with its own set of benefits. Locking your money up hinders you from making impulsive decisions. You also know exactly how much money you'll get, as well as how much interest you'll earn when your term is up. And you may qualify for a higher interest rate than you would earn on a standard savings account, plus the interest rate is fixed, not variable.

Qualifying for opening a savings account

Opening a savings account is relatively quick and easy. Banks usually require applicants to supply their tax file number (TFN), 100 points of identification, and their contact information and home address.

If you're opening a savings account at a bank where you already have an existing transaction account, you should supply your account details too. Finally, check if your bank has a minimum required starting deposit so you can have it on hand as well.

As for eligibility, it depends on the bank. Some banks require that their applicants are Australian citizens or have permanent residence in Australia. Other banks will allow foreigners to open accounts if they confirm that they are in the country or will be arriving within 12 months.

There is no minimum age limit, but, depending on the bank's policy, children younger than 13 will usually require an adult to open the account on their behalf. They will transition to a regular savings account when they turn 18.

Learn more about savings accounts

What to look for when comparing and how to maximise your returns.

  • Pros & cons

  • Tips

  • FAQs

  • Glossary

Easily accessible savings might tempt you to spend

While savings accounts are convenient in the sense that you can deposit and withdraw funds anytime and (if you've got an online account) anywhere, this convenience can also be detrimental to your financial goals. When things are within reach, there isn't much to stop you from taking a few dollars out for an impulse purchase. If you haven't got a lot of self-discipline, you can blow all your savings away without even noticing.

Interest rates for savings accounts are low

Cash deposits like saving accounts come with much lower potential for returns and growth (in the form of interest earned) than, for example a share portfolio or managed investment fund. This is a trade-off for the lower risk a savings account represents.

It's low cost

You'll face minimal upfront and ongoing fees with a savings account. Depending on the bank or credit union you're applying to, you may not even have to pay upfront or account-keeping fees.

It’s low risk

Opening a savings account is one of the easiest, simplest ways of maintaining your finances. It's much less risky than a share investment portfolio, for example (because share can go down in value), although lower risk goes hand-in-hand with lower potential rewards.

It's quick and easy

The application process takes only a few minutes, especially if you apply online. On top of that, you face minimal requirements. Often, all you'll need are 100 points of identification, your home address and contact details, and your tax file number. And most institutions also offer low or zero starting amounts, meaning you don't need to have a lot of money on hand to start saving.

Minimum balance requirements

It's not uncommon for a bank or a credit union to impose a minimum balance requirement for a savings account. The minimum balance is the smallest amount you can keep in your savings account. If you go below that minimum balance, your bank or credit union could charge you transaction or account-keeping fees or reduce your interest rate.

Savings accounts help you grow your money

When you save your money in a piggy bank or a regular transaction account, all you're doing is storing it for another day. Standard transaction accounts earn little or no interest. However, when you place your money in a high interest savings account, you're earning a bit more money as time passes, thanks to compound interest. The longer you keep your money in your account (and the more money you choose to keep), the more you'll have in the future.

Your money is always accessible

If you choose to set up an online savings account, you can make deposits, withdrawals and transfers from anywhere in the world as long as you have your phone with you. And even if you don't go the mobile banking route, opening a savings account at a major bank is still much more accessible and secure than stashing your money away in a jar. All you have to do is find the nearest branch or ATM and you're good to go, whether you need to make a withdrawal, a deposit or a transfer.

Plus, unlike term deposits, you can still make withdrawals. Your money isn't locked away for a year or two, or even longer. So if you run into any emergencies, you can simply dip into your savings account to get yourself out of a bind.

Lastly, it's common practice now to allow account holders to link their savings accounts to a transaction or cheque account at the same institution. This makes it easier to transfer funds from one account to another, as well as avoid annoying fees.

Your money is protected

As mentioned, as long as you're using an ADI that's covered by the Financial Claims Scheme, your savings are guaranteed for up to $250,000 in case the bank or credit union goes bust. Visit the APRA website for a list of institutions covered by the scheme.

Always compare rates online

The best way to get a good deal on a savings account is to take the time to do your research and compare rates online. And don't just focus on the interest rate. Check different offers for their introductory rate, monthly bonus interest rate and their standard variable rate, and see how much you're likely to earn based on these numbers.

For anyone who has a short-term goal that can be accomplished in less than six months, high introductory and bonus interest rates can give a major boost and help them reach their goals much faster. So even if the interest rate isn't that high, if you're not expecting to keep your money in your account for too long you can consider offers with a higher introductory and bonus rate.

Check the fine print about introductory rates

Introductory rates are called that for a reason. They'll only last for the first few months. Make sure you're aware of your credit union or bank's introductory rate policy so that you don't end up disappointed when your interest rate suddenly drops.

Maintain an emergency fund

Keep an emergency savings fund with at least three to six months worth of living expenses. This tip is especially helpful if you're saving up for a short-term goal. So instead of having all your savings jumbled into one bank account, you'll want to open a separate savings account for whatever big thing you're saving up for, then open another account strictly for emergencies.

Keeping things separate will make it easier for you to stay on top of your finances and keep you from accidentally spending all your emergency funds to fuel something less necessary, like an overseas trip or a new car.

Set a reminder for a minimum monthly deposit

Some people like to treat their savings as just another type of bill, only you're making a payment to yourself. Instead of saving the 'scraps', or whatever you have left of your monthly budget at the end of each month, you can set a reminder (or an automated direct debit) to make a monthly deposit into your savings account. Aim to reach a minimum amount each month and see your savings balloon in no time.

Use these simple hacks to reduce bank fees

Bank fees can be a pain. You worked hard for your savings and took the time to find an account with a high interest rate, only to have chunks of your money taken away by fees and charges. Here are four ways you can reduce bank fees:

  • Limit branch visits. If your bank has a good mobile banking service, make the most out of it and conduct as many of your transactions online as you can. Some banks charge extra fees for over-the-counter transactions, so online banking is one way to avoid them.
  • Make fewer large withdrawals instead of frequent small ones. To reduce withdrawal fees, go over your budget first and decide how much money you'll need for the week or month. You're meant to limit the amount of withdrawals you make on your savings account anyway.
  • Know how many transactions you're allowed per month. Some banks may charge for transactions beyond a monthly limit. The simplest solution here is to know your limit and try to stay within it each month.

Are my savings safe with a bank or credit union?

Yes, as long as you open an account with a registered ADI (Authorised Deposit-taking Institution). ADIs are all covered by the Financial Claims Scheme, which means that up to $250,000 deposited in any registered bank or credit union is guaranteed by the government in case the institution ceases to operate. So even in the unfortunate event that your bank or credit union fails, you are not likely to lose your money.

Make sure your bank or credit union is covered by the Financial Claims Scheme by visiting the APRA page.

How does compound interest work?

Compound interest is interest you earn on money that was already earned as interest. That's why it's also called 'interest on interest'.

For example, you open a savings account with an interest rate of 2% p.a. You deposit $250 at the beginning of year one. By the end of year one, your balance is $255. In year two you don't deposit anything, but since interest compounds, you end up with a balance of $260.10.

How do I compare interest rates?

Instead of looking for the highest rates right now, just remember that ideally you'll want an interest rate that exceeds the inflation rate as measured by the Consumer Price Index. Note that this number changes constantly, so be sure to check the RBA page for the latest numbers.

Why is this important? Because if the inflation rate is higher than what you're supposed to be earning in interest, you won't be earning much, perhaps even nothing, in real terms. Remember, inflation drives up the cost of goods, and if you're earning at a lower interest rate than the rate of inflation, you won't have enough buying power to keep up with costs.

How do I qualify for the bonus interest rate on my savings account?

A bonus interest rate is a higher rate than the standard variable rate for your account, granted only in months where you meet stipulated conditions. This could involve keeping a minimum balance in your account (e.g. $5,000) or making a minimum deposit each month (e.g. $500), or both. To find out, carefully read the terms and conditions of a savings account offering a bonus interest rate.

How much money should I keep in my account?

You'll find many different saving rules and strategies on the internet, each with their own merits. One of the most popular 'rules' is the 50/30/20 rule, which states that 50% of your monthly budget should go to things like food, transport and utility bills, your rent or home loan repayments, and other non-negotiable items, 30% should go to your wants or your little luxuries, and 20% should go into your savings. This should work if you don't have a particular financial goal in mind.

But if you're saving up for something big like a holiday or a home renovation project, just calculate the amount needed for that goal and then try to reach for slightly above it in case you need to pay account-keeping fees.

100 points of identification

A nationally-recognised system for providing identification documents. The acceptable documents include:

  • Birth certificate – 70 points
  • Passport – 70 points
  • Australian citizenship certificate – 70 points
  • Australian driver's licence – 40 points
  • Tertiary student ID card – 40 points
  • Centrelink card – 40 points
  • Medicare card – 25 points
  • Credit or debit card – 25 points

APRA

Australian Prudential Regulation Authority, an independent statutory authority supervising institutions in banking, insurance and superannuation, and promoting financial system stability in Australia.

Authorised Deposit-taking Institution (ADI)

Banks and financial institutions must be ADIs in order to accept deposits from members of the public. After gaining a licence from APRA they are subject to ongoing rules and supervision.

Bonus interest rate

Interest added as a reward for meeting certain conditions, such as maintaining the minimum balance, making a monthly deposit, or abstaining from withdrawing within a month.

Bonus savings account

A bonus savings account is a bank account that rewards the account holder with a bonus interest rate when they meet certain criteria.

Compound interest

Compound interest is also called 'interest on interest'. It is interest earned on a sum that is itself earned interest.

Consumer Price Index (CPI)

A measure of changes in retail prices of a combination of goods and services representing consumption expenditure by Australian households, according to data gathered by the Australian Bureau of Statistics.

Credit union

A financial cooperative that is run for and funded by its members. A credit union may offer fewer banking options than traditional banks, but may be able to provide higher interest and lower fees.

Debit card

A debit card is a payment card used for deducting money or making payments from a person's transaction or savings account.

Fixed interest rate

An interest rate which is guaranteed not to change within a specified period, even though market interest rates may change.

Introductory interest rate

An introductory interest rate, also known as a 'honeymoon rate', is an interest rate that is higher than the standard variable rate. The introductory rate is usually offered for the first few months to entice customers into applying for a savings account.

Joint savings account

A joint savings account is an account shared by two or more people. Usually, joint savings accounts are shared by couples, relatives and business partners who are working towards the same goal.

Linked account

A linked account is a savings account that is linked to a transaction account at the same bank or credit union. Institutions often invite customers to link accounts so that they can easily make bank transfers without incurring fees. In some cases having a linked transaction and savings account may be one of the requirements for bonus interest.

Self-Managed Super Fund (SMSF)

A private super fund managed by the fund's beneficiaries – the individuals who expect to be paid a pension or benefits from the fund.

Transaction account

A type of bank account which account holders can deposit money into and withdraw from. These accounts usually earn little or no interest. Transaction accounts may also be cheque accounts.

Variable interest rate

In contrast to fixed rates, which never change during a specified period, variable interest rates can go up or down, often in response to a change in the Reserve Bank's cash rate.