Compare and select savings accounts with high interest rates to make your money work harder for you.
When you’re saving towards a financial goal, interest is a wonderful thing. If you open a bank account that pays interest on your balance, your savings can grow without you even having to lift a finger.
Compare bank accounts with high interest
Why find a bank account with a high interest rate?
If you’ve ever taken out a home loan, you’ll most likely view interest rates with a mindset of “the lower they are, the better off I will be”. However, while lower interest rates are good news for home loan borrowers, the opposite applies when you have a savings account.
When you have a savings account, you earn interest rather than pay it, so it’s important to find an account that offers a high interest rate. The interest rate expresses, as a percentage, the rate at which your bank balance can increase. The interest your savings balance earns is paid back into your account each month, allowing your balance to grow and also making it possible for you to earn interest on your interest.
In short, a bank account with a high interest rate helps you reach your savings goals faster.
How does interest affect my savings balance?
The best way to understand just how much of a difference a high interest rate can make is to look at a case study. For example, let’s consider the situation of Malcolm, a 27-year-old IT worker who has $10,000 to invest. Although he doesn’t have any specific financial goals at the moment, Malcolm simply wants to find a safe way to grow his savings balance as quickly as possible.
He decides to compare two different bank accounts to see which one offers the better deal. The first is a basic savings account with his regular bank. It pays interest at a standard variable rate of 1.5% p.a.
The second account is a high-interest online savings account. As well as a standard variable rate of 1.5% p.a., this account pays a bonus interest rate of 1.5% p.a. whenever Malcolm deposits at least $1,000 each month. This means the account will pay a total interest rate of 3.00% p.a.
Let’s take a look at the difference this higher interest rate can have on Malcolm’s balance in the next few years.
|Account A||Account B|
|Interest rate||1.50% p.a.||3.00% p.a.|
|Balance after 1 year||$22,233.88||$22,470.54|
|Balance after 2 years||$34,652.54||$35,320.39|
|Balance after 3 years||$47,258.76||$48,561.07|
|Difference after 3 years||+$1,302.31|
As you can see, simply by choosing the account with the higher interest rate, Malcolm has earned more than $1,300 extra at the end of three years. This clearly shows the difference that a high interest rate can make to your savings balance.
What types of high-interest bank accounts are available?
There are several different types of bank accounts with high interest rates available, each of which has its own advantages and disadvantages that make it suitable for different types of savers:
Online savings accounts
Online savings accounts pay a competitive rate of interest and offer the quick and convenient option of managing your finances online. They usually offer easy access to your funds and don’t charge any fees, but you may need to satisfy certain conditions (for example, making minimum monthly deposits) in order to earn the maximum available rate.
Ordinary savings accounts
These types of accounts are a little different to online-only savings accounts in that you can also access your funds by visiting a bank branch. However, the interest rates available on ordinary savings accounts tend to be lower than those offered online.
Bonus saver accounts
Also known as reward saver accounts, bonus saver accounts allow you to earn bonus interest on your account if you satisfy specific terms and conditions, such as making minimum monthly deposits and not making any withdrawals. These accounts offer some of the highest interest rates available, but if you neglect to meet the relevant conditions then you will only earn the standard variable rate for that month.
Notice saver accounts
A relatively new product in Australia, notice saver accounts also offer competitive interest rates to help you reach your savings goal. However, you will need to give your bank a certain amount of notice before you can withdraw your funds, usually 31, 60 or 90 days. The longer the notice period you select, the higher the interest rate that applies to your account.
Term deposits offer a safe and secure way to invest your money and enjoy consistent returns. They provide a fixed interest rate on your money for a fixed term, protecting you against interest rate falls but also meaning you can’t take advantage of rate rises. You also won’t be able to access the funds in your account until they mature.
In addition, it’s worth pointing out that you don’t need to open a savings account to take advantage of high interest rates. There are also some transaction accounts that pay interest, known as interest-bearing transaction accounts, that combine interest-earning power with easy access to your funds so that you can manage your everyday banking needs.
How to compare bank accounts with high interest rates
If you’re looking for a bank account with a high interest rate, remember to consider the following features when comparing accounts:
- Your savings goals and requirements. The right account for you will be influenced by your savings habits and whether you need regular access to your money. For example, if you’re disciplined enough to make regular deposits into your account and not make any withdrawals, a bonus saver account could be right for you. At the same time, if you need the security of being able to access your funds at any time, a notice saver or term deposit may not be best. .
- Interest rate. The maximum interest rate that applies to the account will be an important factor in determining your final decision. The higher the interest rate, the quicker your balance will build.
- What you have to do to earn that rate. Keep in mind that in many cases the maximum interest rate quoted is not available to everyone. You may have to satisfy specific requirements to earn that rate, such as giving advance notice before you can withdraw funds, making minimum monthly deposits or maintaining a minimum balance in your account.
- Account fees. The highest interest rate on the market could be worthless if it’s attached to an account with high ongoing fees. Look for a savings account that doesn’t charge any fees and make sure you won’t be pinged with fees for any other transactions, such as online transfers or ATM withdrawals.
- Access to your funds. If access to your funds is important to you, check to see how quickly you will be able to get a hold of your money in an emergency. Can you access your money online, in a branch or from an ATM? Will you incur any fees for making a withdrawal?
- How you can manage your account. Read reviews of a bank’s online and mobile banking portals to ensure that it will be easy to manage your funds.
Bank accounts with high interest rates can help your balance grow and move you closer to your savings goals. Make sure to consider all of the features of an account, not just its interest rate, before deciding if it’s right for you.