Savings account fine print is hiding the punishment for consumers

Savers are being slugged with big penalties for failing to read fine print on bank deposits. Here’s what experts say they should do.

Hidden terms and conditions are eating into Australians’ savings account interest, just as they battle falling returns following Reserve Bank rate cuts.

Changes to bonus rates, introductory rates and meagre base rates that already are virtually zero per cent are making it tougher than ever for savers, who are estimated to be missing out on billions of dollars a year.

Comparison website Mozo.com.au says 90 per cent of its database of 79 banks have announced cuts to savings rates since the RBA cut on February 18. On Monday Mozo noted that ANZ had axed the 2.25 per cent introductory rate on its Online Saver account, “bringing the total maximum rate down to just 1.15 per cent per annum”.

Mozo spokeswoman Rachel Wastell said it was a far cry from what saves could get elsewhere, including the bank’s own ANZ Plus products that carried a 4.75 per cent rate.

“Right now, banks are promoting home loan rate cuts because they’re a win for borrowers, but savings rate cuts are happening in the background,” Ms Wastell said.

Customers who did not read the fine print missed out on understanding the criteria they needed to meet to secure higher interest rates, she said.

Savers are being urged to take a closer look at their accounts. Picture: iStock

“For savers still with the Big Four, now is the time to compare. Challenger banks, specialist banks and smaller regional lenders are leading the charge.”

Bank of Sydney chief banking officer Huw Bough said bonus rate savings accounts had become increasingly popular in recent years, but “when you take a closer look there are all sorts of hoops consumers must jump through to actually qualify for that bonus rate”.

Conditions could include minimum deposits, limited withdrawals, minimum balances and “tricky” introductory periods, Mr Bough said.

“It’s especially concerning as ACCC data found 71 per cent of bonus savings accounts don’t earn the advertised bonus interest in any given month,” he said.

“Consumers need their wits about them to make sure they understand the fine print and all of the terms and conditions applicable.”

Every $10,000 of savings that fails to meet bonus rate conditions could potentially cost a consumer more than $400 a year.

“Given this tough cost-of-living environment, we expect consumers to be calling on those robust savings balances more than ever, putting them at a higher risk of not qualifying for those complicated rules on bonus savings accounts,” Mr Bough said.

He said savers should compare conditions as well as interest rates. “If you don’t need immediate access to your funds, term deposits can offer competitive, guaranteed rates without the need to meet ongoing conditions.”

Mozo’s Ms Wastell said some banks had cut rates more than the RBA, and some by less, while others were quietly shaving rates in ways that were not immediately obvious.

“Base rates are being gutted – Westpac, CBA, and ING have kept bonus rates high while slashing the base rate,” she said. The ANZ Progress Saver base rate was now 0.01 per cent if conditions were not met, she said.

Ms Wastell said a key recommendation from the 2023 ACCC Retail Deposits Inquiry – for banks to alert consumers if they were about to breach bonus rate conditions – was not being followed. “I am disappointed but not surprised that this hasn’t been actioned across the board,” she said.

BONUS CONDITIONS THAT SAVERS MISS

• Transaction minimums with linked accounts.

• Making no withdrawals or limited withdrawals each month.

• Minimum monthly deposits.

• Growing the account balance each month.

• Locking away savings for a certain period to qualify for bonus interest.

Source: mozo.com.au

Originally published as Savings account fine print is hiding the punishment for consumers