Key savings account terms you should know
Offering higher interest rates than transaction accounts, and with some throwing in bonuses for making regular deposits, savings accounts are designed to help you grow your money.
Whether you’re saving for a house, a holiday or a rainy day, choosing the right account may help get you there faster.
This glossary of key terms may come in handy when comparing savings accounts and features.
What types of accounts are available?
Cash management accounts
Cash management accounts act as a hub for managing your finances, investments and mortgages alongside daily transactions.
Everyday transaction accounts
A transaction account is the account you use on a day-to-day basis for bills, expenses and withdrawals. You’re less likely to earn high interest on one of these accounts.
High interest savings accounts
High interest savings accounts are exactly as described: accounts where you benefit from a higher interest rate. Sometimes these rates are a part of a temporary promotional or introductory offer. It’s a good idea to check what the rates will revert to after the introductory period ends.
Incentive/bonus saver accounts
Incentive accounts offer a bonus rate of interest when you adhere to their conditions – for example, making at least one deposit per month and no withdrawals. They often have no monthly fees and can be a good option if you don’t plan to spend or move your money.
Kids’ savings accounts
If you’re looking to teach your kids how to save, a high interest children’s savings account could be the answer. These accounts may offer incentives for monthly deposits, and bonus interest for not making any withdrawals.
Online savings accounts
Online savings accounts can be offered through both standard physical banks and banks that exist solely online. These accounts may offer lower fees and higher interest rates because they cost less for the bank to maintain. If you do require services at a bricks-and-mortar bank, it might be on a fee-for-service arrangement.
Self-managed superannuation and retirement accounts
Self-managed superannuation and retirement accounts allow you to take control of how your retirement fund is invested.
What other terms should you know?
Base interest rate
The base interest rate is the consistent rate of interest that your account will accrue, not including any bonuses.
Maximum interest rate
Savings accounts with a variable interest rate have a maximum rate, which is the total amount of interest you could earn if you meet the conditions for bonus interest.
Maximum monthly interest rate
This is the maximum interest rate you could achieve each month, including any bonuses.
Linked account requirement
Some accounts require you to have a linked bank account for transferring money into and out of your savings account. Sometimes this account can be held at an external institution, but it’s a good idea to check.
Finding the right savings account is the first step on your journey towards achieving your financial goals. Having a good understanding of the key terms will help you make a better choice when comparing savings accounts.