Majors, neobanks cut savings rates – can you still snag a good deal?

Savers continue to absorb the blow of falling interest rates, with a few popular neobanks and one of Australia’s largest banks, ANZ, announcing more cuts this week. On the upside, there are still higher rates out there for the conscientious saver.
ANZ Xinja 86 400 savings cut 14 Oct 2020
ANZ and some neobanks cut savings interest rates this week. Have you compared? Image source: Vitalii Tairov.

ANZ, which has around eight million customers and is one of the four major banks in Australia, made cuts of 0.15 percentage points to introductory and bonus interest rates on its ANZ Online Saver and ANZ Progress Saver savings accounts today.

The new rates, effective 14 October 2020, are:

  • 0.65% – ANZ Online Saver (0.05% base rate + 0.60% introductory rate for the first three months)
  • 0.70% – ANZ Progress Saver (0.01% base rate + 0.69% bonus rate applicable when you meet certain conditions each month)

ANZ’s savings account cuts came less than a fortnight after the Federal Court hit the major bank with a $10 million fine in early October, following a case brought by the banking regulator ASIC in which ANZ admitted it had charged unfair fees totalling around $3.1 million to about 69,000 customers.

The bank was the last of its key competitors to lower savings rates recently, with Commonwealth Bank, National Australia Bank and Westpac having reduced rates in September. Out of the major banks’ top savings rates, Commonwealth Bank currently has the highest at 0.90%, followed by Westpac and NAB at 0.85% and ANZ at 0.70%.

But it’s not just the majors lowering rates for savers – even neobank customers haven’t been immune.

Canstar analysts observed that neobanks including Xinja and 86 400 cut their savings rates, with the rate on Xinja’s “Stash” account falling to 1.50% (-0.15 percentage points) and 86 400’s interest rates on its “Save” account dropping to 1.35% (-0.25 percentage points) respectively this week.

86 400’s cuts came shortly after it told customers the amount of money they could earn bonus interest on per account would be capped at $50,000 from 1 November, down from $100,000. This means customers will only earn 0.10% interest on the portion of their balance above $50,000, although customers can still earn the full rate of interest on up to $150,000 by creating up to two additional savings accounts.

Xinja customers, meanwhile, will only receive interest on the first $150,000 of their account balance. Bear in mind that Xinja’s savings accounts are not open to new customers at the moment, after the neobank hit pause on applications back in March.

Canstar’s finance expert Steve Mickenbecker said the savings market was now looking down the barrel at 0% interest rates.

The moves by ANZ and the neobanks suggest the steady march towards 0% interest rates on savings accounts is continuing, Mr Mickenbecker said.

“And with savings accounts at the major banks now offering a base rate at or below 0.05%, savers have to cast the net wider to find a decent interest rate.”

Across the board, regular savings account rates (including those with introductory bonus rates) and bonus savings accounts (where you’re required to meet certain conditions to earn bonus interest) have fallen by an average of 0.55 percentage points in 2020 to just 0.60% for regular savers and 0.94% for bonus savers, according to Canstar’s database.

But Mr Mickenbecker said there were still competitive interest rates available for conscientious savers willing to move around or stick to bonus conditions.

“Savers can play on the introductory rate merry go round, moving accounts every three or four months to chase a higher rate, or look for savings accounts offering a high bonus rate with conditions they can likely meet each month.”

Top savings accounts on Canstar’s database

  1. 2% – Rabobank Australia’s High Interest Savings Account (0.55% base rate + 1.45% introductory rate for the first four months)
  2. 1.60% – Heritage Bank’s Online Saver (0.80% base rate + 0.80% introductory rate for the first four months)
  3. 1.60% – Bank of China’s Online Saver (0.60% base rate + 1% introductory rate for the first four months)
  4. 1.60% – Up’s Up Savers (0.10% base rate + 1.50% bonus rate)
  5. 1.55% – Citi’s Online Saver (0.35% base rate + 1.20% introductory rate for the first four months)
  6. 1.55% – ME Bank’s Online Savings Account (0.10% base rate + 1.45% bonus rate)

Source: www.canstar.com.au – 14/10/2020. Based on savings account rates on Canstar’s database for a deposit amount of $10,000. Includes flexible savings accounts that allow flexible access to balance whilst paying an interest rate and bonus savings accounts that pay a bonus rate when conditions are met each month. Top 5 selected and products listed in descending order by total rate, followed by base rate. Total rate includes the base rate plus any applicable conditional bonus rate or introductory rate. Conditions may apply to bonus and introductory rates, contact the relevant company for full terms and conditions.

This article was reviewed by our Sub Editor Tom Letts before it was published as part of our fact-checking process.

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