How banks’ sneaky deposit rate changes are costing savers
Many banks offering decent interest rates on deposits are confusing their customers with slippery rules for savings.
A sneaky tweak on savings accounts by banks is robbing many customers of the highest-possible interest rate paid on their deposits.
Banks have been quietly cutting their ongoing rates, or “base rates”, paid on deposits while lifting their short-term introductory or honeymoon rates, as well as increasing the conditions on bonus saver accounts.
Banking specialists say savers must now negotiate a “minefield” of terms and conditions to avoid their deposit interest rate being slashed back to paltry base rates.
Rate tracking analysis by research group Canstar has found that for new accounts with short-term honeymoon rates, base rates have dropped an average 0.67 percentage points since January, while introductory rates fell just 0.16 percentage points.
On bonus saver accounts, which require consumers to jump through hoops to get the bonus interest, the proportion of accounts with base rates below 0.25 per cent has increased from 60 per cent to 70 per cent since January, Canstar found.
“It’s the great divide in the savings market,” said Canstar director of research Sally Tindall.
“For the set-and-forget saver, or anyone who misses a single condition, many base rates are abysmal.
“Anyone on below-average rates should be proactively considering whether there’s a better savings account out there for them.”
The average rate is 1.43 per cent.
Macquarie Bank head of deposits and payments Olivia McArdle said it was natural for people to gravitate towards savings accounts with the highest headline interest rates attached to them.
“Most of the time though, this rate will either be fleeting or very difficult to achieve due to onerous monthly conditions,” Ms McArdle said.
“A lot of people don’t realise this until much later down the track, by which point they’ve usually missed out on a chunk of interest.”
She said the trend of chopping ongoing base rates while increasing bonus rates had intensified since the Reserve Bank of Australia started cutting its official interest rate this year.
“The landscape has now become really complex for savers and is shifting very quickly,” Ms McArdle said.
“It sounds crazy, but the to-do list handed to millions of Australians at the beginning of every month to qualify for bonus interest often includes: don’t make any withdrawals; deposit a lot more money; and make a certain number of transactions on your debit card.
“One wrong move, one unexpected bill or purchase during the month, and you can end up earning a fraction of what you thought you would be getting.”
Ms McArdle said savers seeking a good deal should “cut through the noise and focus on the ongoing rate”.
“Don’t just check your rate each month, check that you’re actually receiving it,” she said.
“If you miss just one condition, your rate can easily go from around 5 per cent to something closer to 0 per cent.”
Canstar’s Ms Tindall said bank customers, on average, now earned just 1.43 per cent ongoing interest on introductory savings accounts, and just 0.19 per cent interest on bonus savings accounts if all the monthly conditions were not met.
She said people should consider how they saved, and what type of account might suit their personality and finances.
“There’s at least a handful of savings accounts still offering rates over 4 per cent,” she said.
“If you spot a rock-bottom base rate, know that it could be acting as a profit booster to enable the bank to post the higher bonus or introductory rates.
“If you do decide to switch to this account, make sure you’re not going to be the one that’s propping up the savings accounts of others.”
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