Banks’ $99 billion payday: ASIC warns Aussies are missing out on savings interest
Key takeaways
- ASIC warns Australians could be missing out on savings interest because of confusing bonus rate conditions.
- Collectively we have ~$1.8 trillion in savings accounts: if all of these accounts earned 5.5% p.a. interest, we'd collect $99 billion in interest each year.
- Many savings accounts now offer rates above 6%, so spending 5 minutes comparison of accounts and checking the conditions
Confusing bonus interest conditions could be costing consumers thousands of dollars in lost interest.
The warning comes as Macquarie Bank faces a proposed $14 million penalty after admitting failures in the way it advertised its Welcome Rate savings offer. The bank has also paid $8.8 million in compensation to almost 40,000 customers.
ASIC says Aussies have a whopping $1.8 trillion sitting in bank accounts – but they're not all earning top-tier interest rates.
How much interest Aussies SHOULD be getting
💰 $1,800,000,000,000 in savings
💰 Earning 5.5% p.a. interest = $99 billion a year in interest
💰 That's an average of $271 million every single day.
We could collectively earn close to $100 billion a year if that $1.8 trillion was earning 5.5% interest (before tax).
So what's stopping us?
71% of accounts never earn the bonus rate
A 2023 ACCC investigation found that 71% of bonus interest accounts failed to pay the bonus rate in an average month, during the first half of that year.
Why? Because the majority of savings accounts have bonus interest conditions, which require customers to do things like:
- Deposit a minimum amount each month
- Grow your balance (excluding interest)
- Make a minimum number of transactions each month
- Hold a linked transaction account with the same bank
- Make no withdrawals from the account
- Maintain a minimum balance (but don't go over their maximum balance, either)
If you don't meet the conditions of your account, you don't get the bonus interest.
When I messed up on this front earlier this year – I withdrew my money on the last day of the month without thinking, so the month ended with a lower balance than it began – I was paid just 1.25% p.a. My expected $800 return was just $165.
Stashing your cash in the wrong account
Other times, customers just don't realise they've got a dud account.
I was chatting with a friend recently about the account she'd set up for her daughter, and when I prompted her to check the interest rate, she realised it was only earning 2% p.a.
When the market is paying 5% p.a. plus, and when banks are competing hard for customer deposits, no one should be settling for a low rate!
Even a small difference in interest rates can add up. On a $20,000 savings balance, an extra 0.5% p.a. would earn another $100 in interest each year. Better off in your account than the banks!
Your 2-minute savings checklist
Note your account's base interest rate
Check the bonus rate, if applicable
See if any introductory bonus period has lapsed
Look up the bonus conditions, including balance limits and withdrawal restrictions
If your account suits you and you're earning a great rate, sit tight! But if you haven't switched in a while, compare high interest savings accounts to see if you can get a better rate and more free money.
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