Savers hit by falling interest rates after honeymoon periods expire

Bank customers are getting caught out by enticing honeymoon interest rates that drastically fall and give them little value. Here’s how to ensure you get more bang for your buck.

Exclusive: Savers tucking away their cash in the bank are getting slammed by dismal interest rates once a honeymoon period expires, dropping by as much as 80 per cent.

Some of the nation’s biggest banks are offering rates of up to 2.7 per cent for the first three months before rates plummet to a piddly 0.5 per cent.

The new analysis by financial comparison website Mozo found some financial institutions are even requiring customers to jump through hoops to receive bonus rates.

This includes making customers open a linked day-to-day transaction account so they can get the short-lived rate.

Some of those to hit customers the hardest include St George’s Maxi Saver, Bank of Melbourne’s Maxi Saver, and BankSA’s MaxiSaver, which all offer a rate of 2.7 per cent.

The rate then falls to 0.5 per cent after just three months.

A Westpac Group spokeswoman — these brands fall under them — said they encourage customers reaching the end of their introductory rate to talk to them first and review their deal.

Savers need to pay attention to the terms and conditions on savings accounts.

Mozo’s spokeswoman Kirsty Lamont said the dismal rates mean customers have to hunt extra hard to ensure their rate doesn’t drastically drop.

“Banks are sucking in savers with honeymoon rates that literally only last for a few months before plummeting,” she said.

“It’s more profitable for the banks to offer a great-looking rate for just a couple months but based on the fact most savers won’t move their money when that rate ends.

“The bank then gets to pay them less interest.”

The Reserve Bank of Australia has kept the cash rate on hold at 1.5 per cent since August 2016 and while it’s been good for those paying down home loans, savers have been hit by poor rates.

Rising Tide Financial Services managing director Chris Browne said customers can easily get stung by pitiful rates if they don’t pay attention when investing their money.

“There can be some nasty surprises down the track if you are not aware of the terms and conditions,” he said.

“Don’t get sucked into introductory rates.”

Mr Browne said also be aware of the minimum and maximum amounts you can keep in savings accounts because if you go under or over these thresholds you can also be hit with a lower rate.

@sophieelsworth

MOZO’S TOP 5 SAVINGS ACCOUNTS

1. UBank USaver, 2.87 per cent.

2. ME Online Savings Account, 2.85 per cent.

3. Australian Unity Active Saver, 2.8 per cent.

4. ING Savings Maximiser, 2.8 per cent.

5. RAMS Saver Account, 2.8 per cent.

Source: Mozo.com.au. All accounts do not have a honeymoon rate. They are ongoing savings rates.