RBA rate cut is bad news for savings accounts

Peter 2 August 2016

Bungee Jumping

Interest rate fall follows disappearance of cash back benefits.

The official Reserve Bank of Australia's (RBA) cash rate is now at a record low 1.50%, following the second rate cut this year.

While that might be good news for home loan borrowers, who will pay less interest on their mortgages, it's a discouraging outcome for those keen to boost their savings.

The RBA's decision to cut rates for the first time in 2016 was in May. This led to several banks reducing rates for high-interest savings accounts, and similar adjustments can be expected this week.

Some banks actually dropped rates ahead of the May cut.

Check out our guide to all the rate changes that have happened in the wake of the cuts.

The cuts in interest rates come as banks increasingly rethink account benefits such as cash back offers, where you get a percentage of your spending back if you use a specific payment method, such as tap-and-go.

Earlier this month, ING Direct announced it would be dropping its 2% cash back offer for payWave purchases from the end of September. In the absence of higher interest rates other benefits, such as bonus payments and free ATM access, become critical factors when comparing banks.

If you're curious as to how changes in the cash rate affect you, check out our in-depth explanation.

Picture: Shutterstock

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