Commonwealth Bank slugs Youth Saver with savings rate cut more than RBA cash rate cut

CBA slashes what’s possibly the only interest-bearing account it can still cut.

CBA is one of six banks so far to cut deposit rates since last week’s cash rate cut, with dozens more expected to follow, says RateCity. Picture: Hollie Adams

Commonwealth Bank has slugged its youth savings accounts with an interest rate cut higher than the Reserve Bank’s recent 25 basis point carving to the official cash rate, which now stands at a record low 0.5 per cent.

The country’s largest bank has announced it will cut its youth saver deposit account by 0.3 percentage points to a maximum rate of 1.55 per cent and a base rate offer of 0.05 per cent, CBA confirmed.

It coincides with rate drops of 25 basis points on CBA’s pensioner security products and Goal Saver accounts.

RateCity research director Sally Tindall said the savings shave to kids’ accounts higher than the RBA’s cut is “disappointing”, especially when these products are predominantly opened through CBA’s school banking program.

“It’s likely that CBA shaved the most off kids’ savers because that was one of the few accounts with something left to cut,” Ms Tindall said. “The fact that CBA’s youth saver account is actively pushed in schools doesn’t necessarily make it the best account for kids.”

The bank’s decision to cut savings rates comes two weeks before it intends to pass on the rate cut in full to home loans.

The RBA prompted a cash rate cut following a bleaker economic outlook, which has been dragged down by bushfires and the ongoing coronavirus outbreak.

Financial incumbents across the sector quickly moved to discount variable rates by the full 25-basis points, amid levy fears.

Ms Tindall said CBA has lowered savings rates early in an attempt to recoup losses from the impending home loan rate drop, which is scheduled for March 24.

“Savers who go above and beyond to qualify for bonus interest deposits are going to be stung the most by these cuts,” she said.

“CBA is one of six banks so far to cut deposit rates since last week’s cash rate cut, with dozens more expected to follow.

Westpac, ANZ and NAB are yet to announce cuts to savings products, but have shaved rates earlier in the year.

According to Rate City, comparable conditional savings accounts among the big four banks place CBA’s savings account well below its competitors by almost 1 per cent.

CBA’s Goal Saver has a maximum rate of 0.65 per cent, if conditions of a monthly $200 deposit and no withdrawals are met.

Westpac’s Life account has a maximum savings rate of 1.55 per cent if all conditions are met, while NAB’s Reward Saver and ANZ’s Progress Saver has respective maximum rates of 1.5 per cent and 1.6 per cent.

CBA’s Goal Saver attracts a maximum rate of 0.65 per cent for deposits under $50,000, a maximum of 1 per cent for deposits between $50,000 and $249,000, and 1.35 per cent for deposits between $250,000 and $999,000

Rate City has also noted CUA’s youth saver has the highest savings account on the market 3.5 per cent, if all terms and conditions are met.

Digital bank 86400 and Up currently offer the highest ongoing savings rates at 2.25 per cent.

Xinja has also said it will hold its 2.25 per cent savings rate but will not take new customers for its Stash deposit account.

A CBA spokesman said: “We regularly review our products and have made changes to some of our deposit rates due to the unprecedentedly low interest rate environment.

“In making this decision we have been very conscious of our near six million deposit customers and carefully balanced their needs, some who rely on interest earned on their savings, as well as our home loan customers receiving the benefit of a reduction in their interest rates. We encourage any of our customers to speak to us to ensure their products suit their needs.”

ANZ and NAB both told The Australian that savings rate cuts are yet to be decided.

A Westpac spokeswoman said the bank’s saving rate are currently “under review”.