Deposit Account Star Ratings - September 2008
IN THIS REPORT WE EXPLORE:
Download Deposit Account Star Ratings (PDF) TURMOIL IN THE MARKETS FROM THE SIDELINE The past six months has seen the sub-prime crisis, the collapse of some of the biggest names in world finance and the failure of a myriad of smaller players. World stock markets have tumbled, and the news this week of Lehman Brothers’ bankruptcy has set off another plunge in world stock markets and released another wave of pessimism. So is now the time to be on the sidelines, away from the volatility of the stock market and in the relatively stable environment of savings? There is some good news on this front. Banks, building societies and credit unions are chasing your money. Deposit rates are as high as they have been in years, and new product innovations are coming onto the market to make saving easier. TERM DEPOSIT RATES ON A TEN-YEAR HIGH The past six months have seen deposit rates climb to the some of the highest levels in the past decade. Behind the surge has been the somewhat rare occurrence of several RBA cash rate increases combined with banks’ hunger for retail deposits to feed their loan activities in the wake of more expensive wholesale money. Competition for a bigger share of the consumer’s savings has been fierce, with rates on offer for both savings accounts and term deposits tipping over the 8% mark. That’s over and above the cash rate. Even the recent RBA cash rate drop and the inevitable flattening of deposit rates that followed has not closed this profitable savings avenue completely. Rates remain at impressive levels and savers can still benefit by locking in some great term deposit rates. The chart below tracks the average 1 year term deposit rates from the four major banks, compared to the 1 year money market rate, an indicator of the cost of funding for banks. The graph shows not only that rates are at their highest in the past decade, but also that for the first time in the last 10 years term deposit rates have overtaken the money market rate over the last six months. This negative margin is firm evidence that the banks are aggressively competing for their share of household deposits, with the average Australian saver the clear winner in the situation.  LOOK WEST FOR BEST VALUE SAVINGS
With these high saving rates in mind, CANSTAR CANNEX has introduced a new award – Best Value Australia - Savings. This award aims to recognise the institution that has offered consistently high rates and impressive products across a range of savings products. Points were scored from the Online Savers and Cash Manager star ratings profile, as well as a range of term deposits. Average rates over the last 6 months for three, six and 12 month term deposits were analysed, with points given for credit rating as well. With these products considered, CANSTAR CANNEX congratulates Bankwest, the inaugural winner. Bankwest has led the way over the past 6 months with consistently high savings rates across the board. At their peak, Bankwest’s term deposit rates reached 8.70%, 1.45% higher than the RBA cash rate. These impressive fixed deposit rates, combined with their Telenet Saver online savings account, and Gold Cash Management Account, provide customers with several options to make the most of the current savings environment.LATEST ADVANCES: TECHNOLOGY AND INNOVATIONRecent years have seen banking move into brave new territory, with many consumers embracing new technology and making the most of the numerous methods now available for day-to-day banking. Several institutions such as ANZ and nab have taken this to the next level, with mobile phone (sms) banking. With mobile phones continuing to develop at a phenomenal rate in this country, mobile phone banking allows customers access to certain banking features such as checking balances, viewing transaction history, and transferring between linked accounts. With mobile phones an essential part of everyday living for most people, the ability to control their finances on the run will be a welcome addition to their banking options. Just as internet banking had teething problems convincing many customers it was safe, sms banking will need to prove itself. But with lessons learnt developing internet banking, sms banking may grow to become everyone’s favourite sidekick to internet banking.With technology comes innovation and there have been many innovative products introduced to the market in recent times. With banking fees an ever popular media topic, consumers are the winners with several institutions making efforts to limit the actual fees paid by customers. The biggest fee on most transaction accounts will be the fee for overdrawing an account. This can be as high as $50. Credit unions have led the way in the past with many offering a grace period to fix the bill when an account becomes negative. Bankwest offers a similar feature called their “safety net facility” which allows customers to overdraw by up to $100 before the excess fee is applied. These fees can also be avoided by nab’s clear banking approach which avoids allowing an account to overdraw where possible, and doesn’t charge a fee if it does. Bank of Queensland’s Reverse Charges Account takes a new approach to fees, rewarding customers with no monthly fee and $2 cash back for keeping $2000 in their account. NEW PRODUCTS OF NOTEWe have noted many new products in the market place over the past six months, adding to the already competitive deposit product market. Illawarra-based building society, IMB Limited has recently released a competitive new transaction account, the Everyday Unlimited account. This account has minimal fees, only charging for other institution’s ATMs and GiroPost transactions, with the $6 monthly fee waived when $2000 is kept in the account. The deal is even sweeter for those who live outside the Illawarra area who pay no transaction fees in Australia whatsoever. A number of credit unions offer a relationship balance discount on fees, recognising all customer balances across deposits and loans.One Direct, with its reputation as an online mortgage provider, has recently launched an Online High Interest Savings account, currently offering 7.50%. Could this step hint at One Direct building on its mortgage success and moving towards becoming a full service online bank? Other institutions with competitive new products awarded with CANSTAR CANNEX rising stars include AMP Banking, FCCS Credit Union, Laiki Bank, and myState Financial. HORSES FOR COURSES
With a multitude of deposit accounts available to customers in Australia, there is an account available for every situation. By following the following four simple steps, it is possible to minimize fees and maximize interest.
These four steps aim to help cut through the mountain for deposit products on the market. The CANSTAR CANNEX deposit account star ratings include seven profiles that will help identify the best value products to follow these steps. Deposit products were rated across four savings and three transaction profiles:
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Australia | New Zealand
BankWest – Best Value Australia - Savings