Savings accounts – how to get the best returns

We all want our money working hard for us earning a good return and look for the accounts which pay the most interest. Beware many of the advertised rates for online savings accounts are for a short periods of time or have special conditions in place. This could mean that the rate you are currently earning on your money might be much lower than the rate you thought you were getting.

 

This practice is known as “dual pricing”. Banks offer a high headline rate along with a lower ongoing rate on the same product. Providers have been increasing the gap between these two rates recently and it’s often the promotional, headline rates that consumers focus on in advertising.

 

A recent InfoChoice.com.au online poll revealed that the majority of consumers view a high ongoing rate as the leading feature of a savings account. 83% of consumers said a high ongoing rate was the most important aspect of an online savings account as opposed to only 13% who claimed a high introductory rate was the most important feature. Interestingly, the brand of the provider was of little importance to customers.

 

InfoChoice.com.au financial services analyst David Lalich comments “While it makes sense that consumers most value a high ongoing rate from their savings account many of them may not know what their current ongoing rate is because providers do not actively promote this information”.

 

“Offering a leading introductory rate does not necessarily imply that the ongoing rate will also be high so it is important that consumers do some investigating on their online saver and look to switch if they aren’t happy with what they find”.

 

There can be some confusion for consumers as there is a misalignment between what customers want from their savings accounts and the marketing efforts of providers. Also online savers can have different requirements for customers to earn the headline rate of interest. For example some products will offer the maximum rate for only a short period of time, some require minimum monthly deposits while others will only offer that rate on new money entering the account or for new customers.

 

 Top 5 Online Savings Accounts by Ongoing Rate

 

Provider

Product

Ongoing Rate

Max. Rate

Hunter United

Premium Online Investor Account

6.37%

6.37%

UBank

USaver

6.01%

6.51%

ME Bank

Online Savings Account

5.60%

5.60%

Arab Bank

Online Savings Account

5.55%

5.55%

Virgin Money

Virgin Saver

5.35%

6.75%

Source: infochoice.com.au

   

 

Top 5 Online Savings Accounts by Headline Rate

 

Provider

Product

Max. Rate

Ongoing Rate

Virgin Money

Virgin Saver

6.75%

5.35%

UBank

USaver

6.51%

6.01%

Citibank

Citibank Online Saver

6.45%

5.25%

RaboDirect

RaboDirect Savings Account

6.40%

5.00%

Hunter United

Premium Online Investor Account

6.37%

6.37%

Source: infochoice.com.au

   

 Rates correct as at 31 August 2010

 

Compares 100s of savings accounts now at infochoice.com.au

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