What Are The Interest Rates On Savings Accounts?

CANSTAR reveals the current interest rates you can expect on different types of savings accounts, and what you have to do to earn interest.

Australians are trying to save money

Australians’ saving levels are the lowest they’ve been since the late 2000s, with a collective household savings ratio of 5.2% in December 2016 (ABS, 2017). And we thought we weren’t saving much when we were saving around 6.3% back in December 2015!

So it’s no surprise that savers have been looking for ways to boost their savings accounts this year. Our data shows the number of people searching for bonus interest rates has increased over the past year, from 52% in the March 2015 – March 2016 year, to 67% in the March 2016 – March 2017 year (CANSTAR).

In this article, we outline the types of savings accounts available and the average interest rates on offer.

Types of savings accounts

There are several types of savings accounts available in Australia, and each of them is suited to a different type of saver.

CANSTAR assesses the following types of savings accounts for the needs of different types of customer profile for our Savings & Transaction Accounts star ratings, Bank of the Year – Savings Award, and Junior Banking Award:

  1. Bonus Savings Account – suited to the Regular Saver, who puts aside savings on a regular basis and is able to meet strict conditions to earn higher levels of interest
  2. Online Savings Account – suited to the Flexible Saver, who wants “at call” access to their savings when they need it, with no restrictions
  3. Children’s Savings Account – suited to the Junior Saver aged under 12 years old, to learn financial literacy and build a savings habit from a young age
  4. Retirement Savings Account – suited to the Senior Saver, who is a retiree needing to maximise their savings, while retaining the flexibility of having “at call” access with no restrictions
  5. SMSF Savings Account – suited to the SMSF Saver, who is an SMSF trustee seeking to achieve high levels of interest on the cash component of their self-managed super fund
  6. Notice Saver Account – suited to anyone keen to save and happy to have limited access to their money, Notice Saver Accounts generally provide a competitive base rate compared to regular online savings accounts. To avoid a penalty when withdrawing your funds, as the name suggests, you will be required to provide notice to your financial institution prior to accessing your funds (e.g. 30 days’ notice)
  7. Pensioner Deeming Accounts – suited to the Senior Saver, Pensioner Deeming Accounts (PDAs) are for over 55s and pensioners who wish to earn an income from their savings that meet the ‘deeming rates’ returns that the government assumes when calculating pension payments – unfortunately, fewer institutions are offering these accounts in the current low interest rate environment

Our data shows the majority of Australians comparing savings accounts on the CANSTAR website are looking for a bonus saver account (79%) or an online e-saver account (8%). This is based on savings account comparisons performed from 17 March 2016 to 17 March 2017.

 

1. What is a bonus savings account?

A bonus savings account is a type of account that gives you bonus interest whenever you meet certain conditions. For example, you might have to make no withdrawals within the month and you also deposit a certain amount of money into the account, or have your salary deposited into a linked transaction account with the same institution.

These accounts are best suited to what we call the Regular Saver, someone who puts aside savings on a regular basis, or is working towards a set savings goal.

With the official cash rate remaining in the doldrums at a dreary 1.50% since August 2016, looking for a higher interest rate will probably require looking for a bonus saving account.

From 17 March 2016 to 17 March 2017, CANSTAR’s database shows that nearly 80% of people comparing savings accounts on our website are looking for a bonus saver account.

Interest rates on bonus savings accounts

The below interest rates are available for bonus savings accounts on our database at the time of writing:

Interest Rates on Bonus Savers
Base Rate Bonus Rate Total Rate
Min 0.00% 0.20% 1.40%
Max 1.81% 3.00% 3.05%
Average 0.37% 1.85% 2.22%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. Rates are based on a balance of $5,000.

Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

Compare Bonus Savings Accounts

2. What is an online savings account?

An online savings account or online e-saver account is a type of account that is primarily managed on the internet. These days, most savings accounts can be classified as online savings accounts that can be managed using online banking or a mobile banking app.

Interest rates on online e-saver accounts

The below interest rates are available for online savings accounts on our database at the time of writing:

Interest Rates for Online Savings Accounts
Base Rate Conditional Rate Total Rate
Min 0.00% 0.00% 0.00%
Average 1.01% 0.74% 1.75%
Max 2.75% 3.00% 3.05%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. Rates are based on a balance of $5,000.
Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

While generally you can earn a higher interest rate if you are willing to look for a bonus saver (assuming you meet the conditions), it is worth noting that some institutions actually offer a higher interest rate on their online savings accounts than on their other types of savings accounts. That is why it is always a good idea to compare what is available when making a decision on where to park your hard-earned savings.

Compare Online Savings Accounts

3. What is a children’s savings account?

A children’s savings account is a type of account available to children aged under 12 years old, to help teach them financial literacy and build a savings habit from an early age.

Access to the account is usually also granted to their parent or legal guardian to make deposits on their behalf.

Interest rates on children’s savings accounts

The table below shows the interest rates a child could earn on a Junior Saver account at the time of writing, if they had a balance of $250:

Base Rates on Junior Savers
Base Rates Bonus Rate Total Rate
Min 0.00% 0.00% 0.00%
Average 0.86% 1.06% 1.92%
Max 5.00% 5.00% 5.15%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. Rates are based on a balance of $250.

Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

Compare Children's Savings Accounts

Compare Other Junior & Youth Banking Accounts

4. What is a retirement savings account?

A retirement savings account is a type of account available to retirees, which offers access to the money “at call” when needed.

These accounts are best suited to what we call the Senior Saver, someone who is retired and is seeking to maximise their savings, while retaining the flexibility of having “at call” access with no restrictions.

Learn more about the implications for retirees of deeming accounts and the interest rates they earn in this article.

Interest rates on Senior Saver accounts

The below interest rates are available for Senior Saver accounts on our database at the time of writing:

Base Rates on Senior Savers
Base Rate at $25k Base Rate at $100k
Min 1.00% 1.25%
Average 1.29% 2.38%
Max 2.00% 3.25%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. The rate displayed is the rate you will receive at that balance, not the rate on the entire balance (i.e. stepped rates are not considered in this table).

Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

Compare Retirement Savings Accounts

5. What is an SMSF savings account?

An SMSF savings account is a type of account available for SMSF trustees. These accounts are best suited to what we call the SMSF Saver, who is an SMSF trustee seeking to achieve high levels of interest on the cash component of their self-managed super fund.

Learn more about investing through an SMSF on our Self-Managed Super page, or find out what our data shows SMSF Trustees are looking for in a savings account.

Interest rates on SMSF savings accounts

The below interest rates are available from SMSF savings accounts on our database at the time of writing:

Interest Rates on SMSF Savers
Base Rate Bonus Rate Total Rate
Min 0.00% 0.00% 1.00%
Average 1.40% 0.41% 1.81%
Max 2.50% 3.00% 3.00%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. Rates are based on a balance of $100,000.

Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

Compare SMSF Savings Accounts

6. What is a notice savings account?

A notice savings account is an account that is similar to a term deposit or an “at call” savings account, but with a twist.

The saver deposits their money with a financial institution, but to withdraw any of the money, the saver must give a certain period of notice, e.g. 30 days. If you don?t give notice, the money stays invested with the financial institution, earning the notice saver interest rate.

In this way, it is different to both an “at call” savings account, where you can access the money whenever you want it, and a term deposit, where you can access the money at the end of a fixed term.

These accounts are typically only suited to those who want to keep adding more to their savings and accumulating interest, but know that they won’t need to withdraw any cash in a hurry.

For this reason, these accounts are best suited to what we call the Regular Saver, who is depositing a certain amount regularly and doesn’t need immediate access to their savings.

Interest rates on notice savings accounts

The below interest rates are available for at-call notice savings accounts on our database at the time of writing:

Base Rates on Notice Savers
Min 2.20%
Average 2.45%
Max 2.75%
Source: www.canstar.com.au

Rates are current as at 1 March 2017. Rates are based on a balance of $5,000.

Only accounts assessed in the Savings and Transaction Accounts Star Ratings have been considered.

 

Check the CANSTAR website to compare what’s currently on offer from savings account providers:

Compare Savings Accounts

To learn more about how to save money, try our Savings Plan Calculator, visit our Budgeting & Saving Tips page, and read the report about our latest Savings & Transaction Accounts Star Ratings:

Savings & Transaction Accounts Star Ratings Reports - CANSTAR

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To the extent that any CANSTAR data, ratings or commentary constitutes general advice, this advice has been prepared by CANSTAR Research Pty Ltd ABN 29 114 422 909 AFSL and ACL 437917(“CANSTAR”) and does not take into account your individual investment objectives, financial circumstances or needs. Information provided on and available in this document does not constitute financial, taxation or other professional advice and should not be relied upon as such. CANSTAR recommends that, before you make any financial decision, you seek professional advice from a suitably qualified adviser. See CANSTAR’s Financial Services Guide and Credit Guide at http://www.canstar.com.au/canstar-research-fsg/

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