Online Calculator | Choosing the best savings account

Choosing the best savings account

Small differences in interest rates on your savings can result in significant increases on interest earnings. As there are so many variations of savings accounts it becomes clear it's worth comparing what's on offer. But aside from the high interest savings accounts can provide (compared to ordinary transaction accounts), they operate under different terms and conditions which also influence the net return you receive and the conveniences you enjoy. You will need to compare savings account features with your banking needs to determine if you have the right savings account.

Savings Accounts

Traditional savings accounts are often used to accumulate small amounts into savings for later transfer to another account. The base interest rates begin low (a 0.01 per cent basic rate is common). You can make them earn like a high interest savings account if you follow certain conditions which will qualify you to a bonus rate. The conditions include making a minimum deposit each month and/or avoiding any withdrawals during the month. If your balance falls below the minimum balance required then account keeping fees will be charged. Compare savings accounts offers from banks and non-bank institutions like credit unions and building societies because some have higher bonus rates than others.

Online savings account

Banks and financial institutions find online savings accounts very economical to operate. By cutting the costs and overheads the savings get passed on as higher returns with online saving accounts. For consumers like you, online savings accounts allow you to access banking services on 24/7 basis. Online savings accounts allow you to transfer money to and from a linked transaction account in the same bank or in another — although having the two accounts in the same bank makes the transfers instantaneous. Make sure to compare savings accounts since interest yields are higher in some banks. However, interest rates are not tiered and you get the same rate regardless of the balance in your online high interest savings accounts.

Kids savings accounts

These are high interest savings accounts designed to encourage your children to become savers. They act like regular savings accounts, offering a low base rate plus bonus rates that vary in proportion to the balance in the account. Fees are usually very low so as not to dampen your children’s enthusiasm for saving. Typically these types of accounts offer full in branch access with the idea that children get to see their savings being handed over and used to the banking process. Children also acquire a direct sense of ownership because their names appear in all account records.

Cash management accounts

You can use these accounts as an everyday transaction account but they offer the added high interest facility. Interest is calculated each day and then paid into the account monthly. One caveat, though: the high interest savings accounts rates will apply only if the initial deposit to open it is substantial. Compare savings accounts terms carefully because some banks accept $1000 but others require as much as $5000 initial deposit. Another thing is that interest rates are tiered and the highest advertised rates only apply to higher balances. For smaller balances, you have to compare savings accounts rates with other types. If balances are high enough, fees may be waived.

To summarise, make sure to check the following items when looking for the right savings account for your needs:

• Duration of and conditions to qualify for bonus rates
• Requirements on minimum balance, deposits, fees and charges
• Limitations on number of withdrawals
• Requirements on linking of transaction accounts
• Conditions on linking of accounts if one of the linked accounts is in another institution.

Article by Richard Greenwood who co-founded banking comparison website www.high-interest-saving-account.com.au which compares leading savings products including Suncorp eOptions. Rates and terms can be compared before applying with the banks.

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