Interest rate rises: how to find the best deal on deposits

Savings account interest rates are climbing, and expected to rise further, but getting the highest rate isn’t as simple as it sounds.

Jumping through hoops is not much fun for anyone, but that’s what savers often must do to get the best interest rates on their bank deposits.

Rates are rising for the first time in many years, with some healthy deals above 3 per cent emerging and likely to multiply.

However, people should beware that terms, conditions and short-term introductory rates can cloud some of the best interest rates, so they should read the fine print and shop around.

RateCity research director Sally Tindall says the gap between the highest and lowest savings rates grows wider with every Reserve Bank of Australia rate rise.

“If you’ve had your money in the same bank since you were knee-high to a grasshopper, chances are you’re getting fleeced,” she says.

Australia has several financial comparison websites that help make deposit shopping easier, including ratecity.com.au, mozo.com.au, finder.com.au and canstar.com.au.

TERM DEPOSIT WINNERS

Tindall says inquiries on RateCity’s term deposit and at-call account web pages have surged in the past three months, which signals that people are actively looking for better deals.

“Right now, term deposit rates are, in many cases, higher than at-call savings rates,” she says.

“However, before you lock up your money, know that variable rates are likely to keep on rising, although by how much is anyone’s guess.”

Also understand what is required to get the best rate, and how a small misstep can make interest disappear.

“For years decent savings rates have come with reams of fine print, designed to trip unsuspecting savers up,” Tindall says.

RateCity research director Sally Tindall says rates should keep rising. Picture: Tim Hunter.

“Some banks want you to take money out, others want you to put it in. Some banks cut you off when you hit a certain balance, others drop your rate when you hit a particular age – happy birthday! It’s confusing and unless you’re on your A-game, at some point you’re likely to get it wrong.

“If you keep missing out on bonus interest each month, ditch the hoops and find a bank that lets you be you. The good news is that ‘no fuss’ accounts are growing in number because banks are starting to realise fine print is uncool.”

SHOP AROUND

Data from Mozo.com.au shows the highest-paying bonus saving accounts and introductory savings accounts come with 3.1 per cent interest rates but also have conditions or time limits, while the best term deposits are above 3.5 per cent.

Mozo.com.au spokeswoman Claire Frawley says it is important to shop around, and also consider what type of savings product best suits you.

“Bank loyalty can prove costly, with some providers offering significantly more competitive rates,” she says.

“Don’t be afraid to bounce between banks and chase a higher savings rate.

“Splitting your nest egg between a high-interest savings account and a term deposit could be a good way to make the most of rising rates, as well as lock in a reliable return.”

Finder.com.au spokeswoman Alison Banney says the big banks have traditionally been less competitive on savings account interest rates “although this is starting to change”.

She says the popularity of term deposits has surged, “but keep in mind that you’ll suffer a reduced interest rate and possibly a break fee if you do want to withdraw early”.

Cash returns are becoming more attractive after years sitting near zero.

“Some of the best savings account rates are now above 3 per cent, however anything about 2.5 per cent is quite competitive at the moment,” Banney says.

“If you’re only getting 1 per cent or so on your savings, you could definitely switch to a better deal elsewhere.”

RateCity’s Tindall says a 2.5 per cent rate is good now, “but in four weeks’ time that benchmark is likely to be even higher”.

BEST RATES RIGHT NOW

TERM DEPOSITS

G&C Mutual Bank 3.6%

Judo Bank 3.55%

AMP Bank 3.5%

abal banking 3.4%

Citi, Macquarie, Rabobank 3.3%

Firstmac Goldfields Money 3.15%

BASE RATE SAVING

ANZ 2.5%

Macquarie 2.25%

Citi 2.1%

Rabobank 2%

Australian Unity 1.85%

Bankwest 1.85%

MOVE Bank 1.5%

Nabtrade 1.5%

Source: Mozo.com.au (as at 12 August 2022)

Originally published as Interest rate rises: how to find the best deal on deposits