Savings account anger: why it's time to cut the confusion

Personal finance commentator Effie Zahos says there is not reason the cash deposits should be so complicated, and change is needed.

When did savings accounts become so absurdly complicated? From having to open a linked everyday account to needing to make a certain number of transactions to get the advertised rate, they often come with a lot of conditions.

And why do I constantly have to chase the best rate – why can’t my bank offer me the same great rate it does to new customers?

Frankly, I’m sick of being told to shop around. While normally this is great advice, the issue here is more so on how these products work. Shopping around won’t solve the complexity of these products and that’s what needs to happen.

So why all the conditions? It all comes down to making money and the interest rates offered by an institution affect its profit margins. Many of the conditions on savings accounts are engineered so customers remain “sticky”. The more “flighty” customers are, the bigger the cash reserves required and that’s not good for the bottom line.

I get that, but what I wish savings account providers kept in mind is that it shouldn’t be easier to follow a Michelin-starred restaurant recipe than it is to secure the advertised rate on your savings.

Let me give you a taste as to how some of the top paying accounts work. ING’s Savings

Maximiser can drop its rate from 5.50 per cent to 0.55 per cent if you don’t adhere to four conditions. BOQ offers an impressive 5.50 per cent rate on its Future Saver account for 14 to 35 years old but you will need to deposit $1,000 into a linked account every month and make five eligible transactions.

Canstar’s Effie Zahos says savings accounts should be simpler. Picture: supplied

Miss this and the rate drops to 0.05 per cent. But your balance needs to stay under $50,000 to get this advertised rate. Virgin Money is offering an impressive advertised rate of 5.35 per cent on its Boost Saver but if you’re over the age of 18 you would have to jump through four hoops to get it and one of those conditions is having to give 32 days’ notice to access your cash. Sounds exhausting but unfortunately these providers are not alone in their conditions.

Another issue for savers is that banks have been slow and selective when it comes to passing on rate hikes. Since May 2022, the cash rate has increased by four percentage points to 4.1 per cent.

Canstar’s analysis shows that interest rates on regular savings accounts have only increased by 2.21 per cent on average over that same period.

Rates on bonus savings accounts are lagging the cash rate to a far lesser degree having moved by 3.60 per cent, but the conditions that need to be met to achieve the bonus rate don’t suit all savers.

While rates on savings accounts with a limited-time introductory rate have risen by 4.27 per cent in that time, these promotional rates are only available to new customers.

The importance of having a great-paying savings account with a healthy balance should not be underestimated. But being bamboozled with complex savings account conditions can make achieving that much harder.

We need to go back to basics to help Aussies build a cash cushion. Earning a great rate on your savings should be more straightforward and institutions need to increase rates in line with cash rate movements.

The recommendations that will come from the ACCC’s investigation into deposit rates are likely to help this happen.

I also hope it creates momentum to make changes to other financial products. The issues of the best deals being offered to new customers and having to jump through hoops are not unique to savings accounts. They also apply to home loans, credit cards, energy bills and more.

Effie Zahos is an author, personal finance commentator and Canstar’s editor-at-large.