You might have heard about Westpac's new Life savings account with its market-leading bonus rate of 3.00 per cent p.a. which is very attractive indeed.
There's no doubt that it's the highest bonus rate available on an Australian saver account right now, but you might be wondering exactly what you have to do to earn that juicy bonus rate.
The Life account does have some conditions...
In order to qualify for the bonus rate, you need to meet the account's age criteria and also make sure the balance of the account increases each month.
All high interest rate bonus savings accounts have conditions that you have to meet to earn the top bonus rate and the Westpac Life account is no exception.
You must be aged between 18 and 29 years old
The top interest rate is only available to savers aged between 18 and 29. As soon as you turn 30, you will no longer qualify for the 3.00 per cent p.a. variable rate.
If you're already over the age of 30 when you open the account, you'll only be eligible for a top rate of one per cent p.a. which is around average at the moment.
Regardless of your age, in order to reach the top rate, whether this is 3.00 per cent p.a. or 1.00 per cent p.a., you'll need to grow the balance each month. This can be from making a deposit each month - there's no minimum amount - or by not making a withdrawal so that your balance grows due to compound interest.
You'll also need to link the account to a Westpac Choice account
You'll need to link the Life saver account to a Westpac Choice transaction account and make at least five eligible payments with your debit card. ATM transactions, BPAY payments and cash withdrawals don't count towards eligible payments.
You should also bear in mind that the Westpac Choice account has a $5.00 monthly account fee. This fee is waived if you're under the age of 21, if you're a student or if you deposit at least $2,000 each month.
The other catch (if you can call it a catch) is that the bonus rate of 3.00 per cent p.a. is only applied to balances of up to $30,000.
How does this bonus rate compare with other accounts?
There's no doubt about it, a rate of 3.00 per cent p.a. in this day and age is hard to find. If you can meet the conditions to earn it, then you should think very seriously about opening the Life saver account. If course, if you're over the age of 30, have more than $30,000 to invest or if you can't guarantee that you'll grow the balance each month, then it might be an idea to look at other products instead.
Looking for alternative savings products
If you're one of the savers who won't benefit from the Life account's top interest rate, then don't despair as there are lots of products out there that still offer reasonable interest rates.
Look at savings accounts with high introductory rates
These accounts offer savers a short introductory period - usually four months - which has a relatively high interest rate. After the introductory period ends, the interest reverts to a standard rate which is often much lower. These accounts can work well if you're prepared to look out for and move your money to a new product at the end of each "honeymoon” period.
HSBC's Serious Saver offers customers an introductory rate of 1.75% per cent p.a. for four months, after which it reverts to 0.15 per cent p.a. which is quite low. These interest rates apply to balances of up to $1,000,000 and to qualify for the bonus rate you have to make no withdrawals within the month.
Rabobank's Online Savings account also offers an introductory period of 2.00 per cent p.a. which reverts to 0.55 per cent p.a. after four months. This applies to balances of up to $250,000; balances of more than $250,000 have a blanket interest rate of 0.55 per cent p.a. which isn't subject to an introductory period.
You could also look at term deposits
If you're not willing to move your money every few months, then one good solution could be to put your money into a term deposit.
A term deposit is an investment vehicle which can offer savers a fairly high interest rate as long as they don't mind leaving the money to accrue interest without being touched for a set period of time. Once you've deposited money into the term deposit, you have to leave it there until it matures. The good thing about term deposits is that you can be certain about the amount of money you'll get back because the interest rate is fixed for the duration of the term, so it won't be affected by rate cuts.
Judo bank offers a two-year term deposit that has an interest rate of 1.45 per cent p.a. as long as you don't make any withdrawals during this time. ME Bank offers a 12-month term deposit with an interest rate of 1.15 per cent, which might work well if you're looking for a shorter term. Remember, when you put your money into a term deposit, it has to be locked away until the end of the term without any withdrawals to earn the full amount of interest.