Will you get a better rate with a savings account or a term deposit?
04 Apr 2023
Looking for a place to stash your cash and get a decent return for your money? Canstar reveals some of the best-paying savings accounts and term deposits in the market and how the rates compare.
It has been 11 months since the Reserve Bank of Australia (RBA) began increasing the cash rate and, even though there has been a pause this month, savers are finally starting to see rates worth getting excited about. It is now possible to find savings accounts offering a rate that begins with a five.
And it’s about time. As the ACCC noted in February, when it announced that it is launching an inquiry into deposit interest rates, in most cases banks passed on the cash rate increases in full to their home loan rates but “increases in interest rates on deposit products appear to have typically been smaller and less consistent”. The ACCC added that in many cases, banks have only applied increases in the cash rate to some of their deposit products, often with conditions attached.
The table below highlights the ACCC’s point. Even though the cash rate increased by 3.5 percentage points between April 2022 and March 2023, the increase to the average base rates on various types of savings products has been significantly lower.
Average savings account rates
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| Average Rate in 30-Apr-22 | Current Average Rate* | Change | ||
|---|---|---|---|---|
| Cash Rate | 0.10% | 3.60% | 3.50% | |
| Base Savings Accounts | Base Rate | 0.18% | 2.20% | 2.02% |
| Bonus Savings Accounts | Base Rate | 0.05% | 0.40% | 0.35% |
| Bonus Rate | 0.45% | 3.39% | 2.94% | |
| Total Rate | 0.51% | 3.79% | 3.28% | |
| Promo Savings Accounts | Base Rate | 0.17% | 1.88% | 1.71% |
| Promo Rate | 0.38% | 2.15% | 1.77% | |
| Total Rate | 0.47% | 4.03% | 3.56% | |
Source: www.canstar.com.au – 3/04/2023. Savings account interest rates based on a deposit balance of $10,000, paying a total rate of at least 0.05% p.a. Base Accounts: Includes accounts that only pay a base rate, i.e. with no conditional or promotional bonus rates. Bonus Accounts: Includes accounts that pay a bonus rate when conditions are met each month. Total rate includes the base rate plus the conditional bonus rate. Promo Accounts: Includes accounts that pay a promotional rate for a limited time after account opening. Total rate includes the base rate plus the promotional rate.
The good news is, it is possible to find a place to stash your cash and get a solid return. Canstar has tracked down some of the best-paying savings accounts and term deposits on offer. We look at how the rates compare.
Top-paying savings accounts
So which institutions are offering the highest rates on savings accounts? As you can see from the table below, there are four banks offering accounts paying 5% or more – Bank of Queensland, Rabobank, ING and MOVE Bank. The rates of the remaining five on the top nine list range from 4.55% to 4.85%.
Top-paying savings accounts
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| Provider | Account | Base Rate | Bonus/ Promo Rate | Total Rate | Monthly Bonus Conditions/ Promotional Period |
|---|---|---|---|---|---|
| BOQ | Future Saver 14-35 yrs old | 0.05% | 5.10% | 5.15% | Be aged between 14-35 years, Deposit $1,000, and make 5 eligible transactions* |
| Rabobank Australia | High Interest Savings Account | 3.75% | 1.25% | 5.00% | 4 Months |
| ING | Savings Maximiser | 0.55% | 4.45% | 5.00% | Deposit $1,000, make 5 eligible purchases, and grow your account |
| MOVE Bank | Growth Saver | 0.10% | 4.90% | 5.00% | Deposit $200 and make no withdrawals |
| Great Southern Bank | Goal Saver | 0.50% | 4.35% | 4.85% | Be aged between 18-24 years, Deposit $500, and make 5 eligible transactions |
| Macquarie Bank | Savings Account | 4.00% | 0.80% | 4.80% | 4 Months |
| Westpac | Life – 18-29 | 1.60% | 3.10% | 4.70% | Be aged between 18-29 years, make 5 eligible transactions, and grow your balance |
| ubank | Save Account | 0.10% | 4.50% | 4.60% | Deposit $200 |
| Virgin Money | Boost Saver | 0.05% | 4.50% | 4.55% | Deposit $2,000 and make 5 eligible purchases |
Source: www.canstar.com.au – 3/04/2023. Based on savings accounts on Canstar’s database, with rates based on a deposit of $10,000. Top 9 selected and table sorted in descending order by total rate, followed by base rate. *Bonus criteria waived for 14-17 years olds.
While the rates may be pretty good, it’s worth noting that all nine accounts featured on this list have some sort of conditions attached in order for you to get the maximum rate or the high rate is only for a short period.
For example, to get the highest rate of 5.15% from BOQ you need to be aged between 14 and 35. If you’re 18 and over you also need to deposit $1,000 and make five eligible transactions from your everyday account each month to get the 5.10% bonus interest. This rate is also only available on the first $50,000.
Rabobank might have no age restrictions or monthly deposit and transaction requirements but the rate of 5% only applies for the first four months. After the promo period has ended, you’ll earn just 3.75%.
Conditions are definitely a big trap to be aware of with savings accounts – and it’s something that I hope the ACCC considers in its investigation – but the key is to make sure you understand what they are and put the steps in place to meet them.
My top tip is to make this easy for yourself by automating the process. For example, if you need to deposit a certain amount each month to get the bonus rate then set up an automatic transfer on payday so that you don’t forget. If you have to use your card to make a purchase five times, then make sure you do this at the beginning of each month so you can tick it off your list nice and early.
And, if you have opened an account with an introductory promotional rate, set up some sort of system to remind you when it ends so that you can switch to a new account. This may be a note in your diary or an alert on your phone’s calendar app – whatever you think will work for you.
Savings accounts with no strings attached
If you don’t want to be jumping through hoops or are worried that you simply won’t meet the conditions, then it is possible to find accounts with no strings attached. Sure, the rate may not be as high but at least you will have the certainty of knowing exactly what interest you will earn. Check out the table below for the highest rates currently on offer with no conditions or introductory promo rates.
Top-paying savings accounts with no strings attached
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| Provider | Account | Interest Rate |
|---|---|---|
| ANZ | ANZ Save Account (ANZ Plus) | 4.25% |
| Bankwest | Easy Saver | 4.00% |
| Great Southern Bank | eSaver Flexi | 4.00% |
| Macquarie Bank | Savings Account | 4.00% |
| Citi | Online Saver | 3.85% |
| MOVE Bank | Online Saver | 3.85% |
Source: www.canstar.com.au – 3/04/2023. Based on savings accounts on Canstar’s database, with rates based on a deposit of $10,000. Top 5 selected and table sorted in descending order by interest rate, followed alphabetically by provider. *ANZ Plus Save Account requires the ANZ plus app.
Top-paying term deposits
So, we have seen it is possible to get rates as high as 5.15% on a savings account but how do term deposits stack up? Well, there is only one term deposit on Canstar’s database paying 5% but you’d have to lock your money away for five years to get that rate!
The rates on term deposits may not be as high as those on some of the top-paying savings accounts but on the plus side there are no hoops to jump through – you’ll get a flat ongoing rate.
When it comes to term deposits, rates can vary depending on how long you are willing to lock your money away. The tables below show the top-paying term deposits for a variety of terms ranging from six months to three years.
Top 6-month term deposit rates
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| Provider | Rate | When Interest is Paid |
|---|---|---|
| Firstmac | 4.45% | At Maturity |
| AMP Bank | 4.40% | At Maturity |
| Judo Bank | 4.35% | At Maturity |
| Bank of Sydney | 4.33% | At Maturity |
| Bank First | 4.30% | At Maturity |
| ING | 4.30% | At Maturity |
Source: www.canstar.com.au – 3/04/2023. Based on personal non-compounding term deposits on Canstar’s database, with rates based on a deposit of $50,000. Includes all payment frequencies. Only considers the highest rate available from each provider. Table sorted in descending order by rate, followed alphabetically by provider.
Top 9-month term deposit rates
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| Provider | Rate | When Interest is Paid |
|---|---|---|
| AMP Bank | 4.55% | At Maturity |
| ME | 4.50% | At Maturity |
| BOQ | 4.45% | At Maturity |
| Judo Bank | 4.40% | At Maturity |
| Bank First | 4.35% | At Maturity |
Source: www.canstar.com.au – 3/04/2023. Based on personal non-compounding term deposits on Canstar’s database, with rates based on a deposit of $50,000. Includes all payment frequencies. Only considers the highest rate available from each provider. Table sorted in descending order by rate, followed alphabetically by provider.
Top 1-year term deposit rates
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| Provider | Rate | When Interest is Paid |
|---|---|---|
| Orange Credit Union | 4.75% | At Maturity |
| AMP Bank | 4.65% | At Maturity |
| Firstmac | 4.60% | At Maturity |
| ING | 4.60% | At Maturity |
| Judo Bank | 4.60% | At Maturity |
| Macquarie Bank | 4.60% | At Maturity |
Source: www.canstar.com.au – 3/04/2023. Based on personal non-compounding term deposits on Canstar’s database, with rates based on a deposit of $50,000. Includes all payment frequencies. Only considers the highest rate available from each provider. Table sorted in descending order by rate, followed alphabetically by provider.
Top 3-year term deposit rates
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| Provider | Rate | When Interest is Paid |
|---|---|---|
| Judo Bank | 4.90% | At Maturity |
| AMP Bank | 4.70% | At Maturity |
| BankVic | 4.50% | Annually / At Maturity |
| G&C Mutual Bank | 4.50% | Annually / At Maturity |
| Citi | 4.40% | Monthly / Annually / At Maturity |
| Qudos Bank | 4.40% | Monthly / Annually |
Source: www.canstar.com.au – 3/04/2023. Based on personal non-compounding term deposits on Canstar’s database, with rates based on a deposit of $50,000. Includes all payment frequencies. Only considers the highest rate available from each provider. Table sorted in descending order by rate, followed alphabetically by provider.
Deciding how long to lock your money away can be one of the trickiest parts of choosing a term deposit. If rates are on the rise then you may be better off spreading your money across a range of terms so that way you can take advantage of any upward rate movements. If you don’t think rates are going up anytime soon then a longer term may suit you.
It’s important to remember that if you want to access your money before the term is up, it will cost you. You may be hit with an administration or penalty fee and the interest rate you earn will probably be adjusted. Plus, in most cases, you won’t be able to withdraw your money instantly. Generally, you’ll need to provide 31 days’ notice.
When comparing term deposits it’s also a good idea to check when interest is paid. If you need a regular cash flow, you may prefer one that pays interest monthly but keep in mind the rate will likely be lower than one where interest is paid at maturity.
Cover image source: Soho A Studio/Shutterstock.com
This article was reviewed by our Editorial Campaigns Manager Maria Bekiaris before it was updated, as part of our fact-checking process.
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