Beware of hazardous savings conditions

There are a lot of traps to watch out for these days when it comes to savings accounts, say our CANSTAR Financial Analysts.

Eye-catching advertised rates for deposit accounts may only be introductory rates or promotional rates. They area normally only valid for a limited period of time, say a year, and then they are only offered for new customers.

After the introductory rate period, the interest rate reverts back to a lower interest rate – so the rate your savings earn may be a lot less than you anticipated.When weighing up the long-term suitability of this type of product to your needs, it is wise to take into account the interest rate this account will pay after the introductory period ends.

Higher interest rates offered on savings accounts are now often accompanied by conditions that can seriously impact on your ability to make the most of those high rates.

The most common form of condition wrapped into interest rates is the bonus rates. These are interest rates that are only payable provided certain conditions are met.

For example, some accounts – particularly online savings accounts – will set a minimum balance you have to keep in the account in order to earn the total interest rate, or they may specify that you don’t get the bonus monthly interest rate if you make any withdrawals from the account that month. It’s all in the fine print, so we always urge consumers to read the terms and conditions carefully before putting their money up.

When considering the best deposit account for you, CANSTAR advises you check the following:

  • Bonus rate terms
  • Balance requirements
  • Withdrawal limits
  • Transfer times
  • Linked transaction account requirements
  • Restrictions applying to clients of other institutions

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