Banks want access to 'mum and dad' savings

HIGHER borrowing costs due to the global credit crunch has made banks keener to get their hands on ¿mum and dad¿ deposits.

Banks want access to 'mum and dad' savings

HIGHER borrowing costs due to the global credit crunch has made banks keener to attract retail or “mum and dad” depositors, according to ratings agency Cannex.

Banks have two major sources of funding – the wholesale market or the retail market. Cannex says because the global credit crisis has made it more expensive to borrow money in the wholesale market banks, the retail market has become the most cost-effective way for them to access money for lending. This has led to a marketing drive to lure more mum and dad savers.

Rates gap

Although banks have been slower to pass on higher interest rates to savers than to borrowers, the drive for more customers is having an impact on rates. 

Cannex - which has just reviewed over 365 deposit accounts - says the gap is closing between the Reserve Bank’s official cash rate of 7 per cent and the average interest rate offered to savers by the major banks.

“This is indicative of the fierce competition out there and it’s great news for consumers who can now make more money parking their cash in a suitable savings account or term deposit,: said Cannex financial analyst Jeremy Ooi.

Check the fine print
Cannex says customers need to be aware of what they are signing up to and not be blinded by headline interest rate numbers. Terms and conditions vary between online savings accounts, cash management accounts and term deposits and can be a trap for the unwary.

Online savings accounts often have the best interest rates, but also the most conditions. One of the most common conditions is the bonus rate, where interest rates are only payable if - for example - no withdrawals are made in a month or a minimum amount is saved each month.

Introductory rates are also becoming more common, where rates are high for a limited period of time for new customers but then revert back to lower rates.

New products
Cannex highlighted three new offerings in its report – NAB’s Gold Banking, Suncorp’s eOptions and BankWest’s Hero transaction account.

With NAB’s Gold Banking customers have free access to all non-NAB ATMs in Australia. A monthly $12 account fee is waived if deposits of at least $5000 are made each month.

Suncorp’s eOptions lets customers divide their savings into variable and fixed rate portions.

BankWest’s Hero account has no monthly account keeping fee if a minimum of $2000 is deposited each month, and offers an interest rate of 5 per cent a year on balances up to $5000.