Australians' $1 billion lost interest bill

Research from financial comparison experts InfoChoice shows that Australian consumers have short-changed themselves of more than $1 billion worth of interest in the past six months.

The results from the study conservatively estimate there is $144 billion worth of Australians' money not earning the best possible interest rate, thanks to a 2.20 per cent gap between the highest available rate and the lowest rate offered by one of the Big Four.

"At a time when all deposits are guaranteed by the Federal Government and AAA rated, there is no better time for Australians to be searching for the best possible deal," said InfoChoice COO Adam Rigby.

According to InfoChoice, Australian savers can be split up into three different personality types; 'Savings Switchers', 'Savvy Savers' and 'Stagnant Savers'.

'Saving Switchers' are consumers who continually monitor the industry and religiously switch their savings to the account offering the highest interest rate. According to InfoChoice, vigilant Savings Switchers would have typically achieved an average interest rate of 6.44 per cent over the past six months.

'Savvy Savers' are those consumers who deposit their savings in a consistently high performing savings account, avoiding the lure of one off promotional offers. Over the past six months, InfoChoice calculates that the Savvy Savers would have earned up to a maximum average rate of 6.12 per cent.

'Stagnant Savers' are responsible for 70 per cent of the total value of deposits in Australia, a figure which has increased by more than $2.3 billion over the past six months. With their money deposited in an online at-call account with one of the four major banks, savers in this category would have only received an average interest rate of 4.61 per cent.

"Stagnant Savers are typically apathetic savers who choose to deposit their money with the Big Four’s transactional accounts on the basis of the perceived security of the bank, despite the fact the majority of the accounts offered pay little to no interest," explains Rigby.

InfoChoice's exclusive research reveals that none of the major banks were amongst the Top 4 best average savings rates for online at-call banking accounts, with NAB, Westpac, CBA responsible for three of the four worst performing interest rates.

In what may come as a surprise to some, InfoChoice's comparison of those banks that consistently offer high interest rates with those that only offered short term promotion rates, shows that "rate chasing" isn't always the best option.

"While promotional rates can look very attractive and offer a slight monetary advantage, savers need to remain wary of the seemingly increasing number of conditions attached," explains Rigby.

Conditions attached to promotional interest rate offers typically include; limiting the offer to new customers only, limiting the time period for the rate, limiting account withdrawals, enforcing minimum and maximum balance amounts and requiring a linked transaction account (with its own fees and conditions).

"Although Australians are becoming better at availing themselves of high interest at-call savings accounts, too many still maintain high balances within transactional accounts," said Rigby.

"Many of these pay interest as low as 0.01 per cent, although we have begun to see the emergence of a new breed of transactional accounts offering decent rates, led by institutions such as AMP and Members Equity.

"By using a comparison site like infochoice.com.au consumers can easily compare interest rates from more than 50 financial institutions to ensure they are getting the best possible deal," he said.

Top 4 average savings rates*

Infochoice.com.au