Some savers are earning less than $10 in interest per year, but you don’t have to

It’s pretty slim pickings for anyone hoping to earn a decent return on their savings by stashing money into an online savings account or locking it up in a term deposit, although there’s still value to be found if you know where to look.

The effect of falling savings rates on Aussie nest eggs is clear, with Canstar analysis showing some online savings accounts are now paying less than $10 in interest over a year.

Many banks have reduced home loan interest rates since the Reserve Bank lowered the official cash rate to a new historic low of 0.75% in October, making repayments cheaper for millions of their customers. However, savers have arguably received the short end of the stick, as many banks have also slashed the interest rates paid on savings accounts (which are now mighty close to zero in some cases) and term deposits.

Falling savings rates Oct 19_Article
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The big four banks – Commonwealth Bank, National Australia Bank, Westpac and ANZ – have lowered the base rates on their online savings accounts to between 0.10% and 0.15%, Canstar’s database shows.

Over the past few months, other popular savings account providers ING and ME Bank, have actually cut online savings account rates by around 0.39 percentage points more than the big four, on average  – they’re now offering base rates of 0.25% and 0.50%, respectively.

Overall, online savings accounts had an average of 0.47 percentage points shaved off their rates since the first cash rate cut in June this year, according to Canstar data, while rates on bonus saver accounts – where certain conditions must be met to earn bonus interest – have fallen by an average of 0.51 percentage points.

It’s even worse for term deposit holders, though, with six-month deposit rates on our database going down by an average of 0.66 percentage points, 12-month deposit rates falling by 0.73 percentage points and two-year deposit rates dropping by 0.80 percentage points.

What does that all mean in dollar terms?

If you were to put $10,000 in an account paying 1.70% p.a. – which is currently the highest base rate on Canstar’s database, excluding any introductory offers – you would earn $14.17 in monthly interest, or about $170 in a year. If you had that same amount in an account paying the lowest rate of 0.10% you would earn a dismal 83 cents per month, or only around $10 a year.

Stashing that $10,000 in a two-year term deposit could currently earn you at least $260 or a maximum of around $360 at maturity, based on the rates on our database.

So, where should you put your money if you’re still keen on savings accounts or term deposits? There are still savings accounts out there paying more than 2% interest, but it may mean switching providers or meeting certain conditions in order to qualify for bonus interest.

Top 5 savings & term deposit interest rates revealed

The providers offering the highest savings account and term deposit rates right now include Macquarie Bank, MyState Bank, Qudos Bank and Teachers Mutual Bank (along with its subsidiary, UniBank), according to Canstar’s database.

Top online savings accounts

The below table shows the top flexible online savings accounts on our database for a deposit of $10,000. These are accounts where no conditional bonus interest applies but there may still be introductory (or promotional) rates that are only available for a limited time.

Top Flexible Savings Accounts
Company Account Base Interest Rate Promotional Bonus Rate Total Rate
Macquarie Bank Savings Account 0.60% 2.05% 2.65%
Rabobank Australia High Interest Savings Account 1.05% 1.45% 2.50%
AMP Bank Saver Account 1.40% 0.96% 2.36%
Bankwest TeleNet Saver 0.50% 1.85% 2.35%
Citi Online Saver 0.85% 1.45% 2.30%
Source: www.canstar.com.au – 14/10/2019. Based on all flexible savings accounts available to Australian customers with a deposit amount of $10,000. Flexible savings accounts include those with no conditional bonus interest rate. Products listed in descending order by Total Rate, followed by Base Rate. Total Rate includes base rate plus any applicable promotional bonus. Conditions may apply to promotional rates, contact the relevant company for full terms and conditions.

Top bonus saver accounts

The table below shows the highest bonus saver interest rates, including conditional bonus rates, for savings accounts on Canstar’s database at the time of writing. Rates shown are for a deposit amount of $10,000 and include bonus interest rates that require certain conditions to be met, such as depositing a certain amount or not making any withdrawals in a given month. It could be worth checking with individual providers for what the bonus conditions are on each account.

Top Bonus Savings Accounts
Company Account Base Interest Rate Conditional Bonus Rate Total Rate
MyState Bank Bonus Saver 0.80% 1.70% 2.50%
RAMS Saver Account 1.10% 1.20% 2.25%
Australian Unity Active Saver 0.75% 1.50% 2.25%
ME Online Savings Account 0.50% 1.70% 2.20%
HSBC Flexi Saver 0.65% 1.50% 2.15%
BOQ Fast Track Saver 0.35% 1.80% 2.15%
Source: www.canstar.com.au – 14/10/2019. Based on all bonus savings accounts available to Australian customers with a deposit amount of $10,000. Bonus savings accounts include those where a bonus interest rate is earned when specified conditions are met. Products listed in descending order by Total Rate, followed by Base Rate.  Total Rate includes base rate plus any applicable conditional bonus. Promotional bonus interest rates may apply. Contact the relevant company for full bonus and/or promotional interest terms and conditions.

Top 6-month term deposits

The table below displays the highest term deposit rates on Canstar’s database at the time of writing, for a deposit amount of $10,000 and a term of six months, with interest paid at maturity.

Top 6-Month Term Deposits
Company Product Rate
Qudos Bank Term Deposit 1.95%
Community First CU Term Deposit 1.85%
ME Term Deposit 1.85%
Teachers Mutual Bank / UniBank Term Deposit I10 1.85%
Arab Bank Australia Term Deposit 1.80%
QBANK Term Deposit 1.80%
Source: www.canstar.com.au – 14/10/2019. Based on the top rates for term deposits available to customers with a deposit amount of $10,000 and a total term of 6 months with interest paid at the end of the deposit term.  Sorted in descending order by rate, followed by alphabetically by company.

Top 1-year term deposits

The table below displays the highest term deposit rates on Canstar’s database at the time of writing, for a deposit amount of $10,000 and a term of one year, with interest paid at maturity.

Top 1-Year Term Deposits
Company Product Rate
Qudos Bank Term Deposit 1.95%
Teachers Mutual Bank / UniBank Term Deposit I10 1.90%
Community First CU Term Deposit 1.85%
Transport Mutual Credit Union Term Deposit 1.85%
Nexus Mutual Classic Term Deposit 1.75%
QBANK Term Deposit 1.75%
Bank First 1 Year Regular Income 1.75%
Source: www.canstar.com.au – 14/10/2019. Based on the top rates for term deposits available to customers with a deposit amount of $10,000 and a total term of 1 year with interest paid at the end of the deposit term.   Sorted in descending order by rate, followed by alphabetically by company.

Top 2-year term deposits

The table below displays the highest term deposit rates on Canstar’s database at the time of writing, for a deposit amount of $10,000 and a term of two years, with interest paid at maturity.

Top 2-Year Term Deposits
Company Product Rate
Teachers Mutual Bank / UniBank Term Deposit I10 1.90%
Community First CU Term Deposit 1.85%
Transport Mutual Credit Union Term Deposit 1.85%
The Mutual Bank Term Deposit 1.80%
QBANK Term Deposit 1.75%
Source: www.canstar.com.au – 14/10/2019. Based on the top rates for term deposits available to customers with a deposit amount of $10,000 and a total term of 2 years with interest paid annually, or at the end of the deposit term.  Sorted in descending order by rate, followed by alphabetically by company.

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