Having your interest paid into a separate account can help with cash flow, however, it could mean you lose out on bonus interest.
When you have a savings account, you earn a high rate of interest on the balance in your account. In most cases, the interest you receive is paid back into the same savings account where it can earn more interest and help your savings balance grow.
But there are certain situations where you might want to have the interest you earn paid into a separate account, for example if you want to use that interest as a source of ongoing income. However, this feature is not available on all accounts from all banks, so you’ll need to ask your account provider whether having interest paid into a separate account is a realistic option for you.
Savings accounts that pay your interest into a different account
What are the benefits of having interest paid into a different account?
There are several reasons why you might want to have the interest from your savings account paid into another account. For example, you might want the interest you receive to be paid into your everyday transaction account so it can be used to help manage your day-to-day finances. In this way, you could be able to draw an income from your savings.
Alternatively, you may wish to put the interest you earn directly towards saving for a particular goal, such as a new TV or an end-of-year holiday. If this is the case, being able to have the interest paid into a separate account may offer an easy way to automatically save for your goals and also make it simpler to manage your savings for different areas of your life.
It’s also worth pointing out that term deposits are designed to pay the interest your balance earns into a separate account. In many cases, the interest will be paid into a separate bank account once the term deposit matures, but some accounts will make regular interest payments into a separate account, allowing you to re-invest those extra funds earlier.
What are the drawbacks of having interest paid into a separate account?
While there are undoubtedly benefits to having interest paid into a separate account in certain circumstances, in other situations such an arrangement is far from ideal. For example, your bank might stipulate that interest be paid into a different account so you can’t earn a high rate of interest on your interest.
You may want to have interest paid directly back into your savings account so your balance can grow more quickly — the next time interest is calculated on your account, you’ll receive interest not only on your original savings balance but also on the savings interest you have already earned. But if the interest is credited to another account, it may take longer to reach your savings goals.
Which banks pay interest into separate accounts?
If you think having interest paid into a separate account could make it easier to organise your finances or earn an income, you’ll need to contact your bank, building society or credit union to find out whether this options is available. Policies surrounding interest payments can vary depending on the financial institution and the individual account you choose, so you’ll need to do some research to find out what interest options are available.
|Bank||Can you have the interest paid into a different / external account?|
|AMP||AMP does not have a savings product that allows interest earned to be paid into a separate account - interest must be paid to the account that it was earned on. However, AMP does offer an auto sweep that allows a customer to request that the interest that is paid to one account can then be automatically swept from that account to another one.This is available on AMP’s at-call savings and everyday and notice accounts:|
The facility is not available on term deposits or offset deposit accounts.
|ANZ||With an ANZ term deposits, interest can be paid into a separate account at an agreed frequency. However, interest earned on a Progress Saver or Online Saver Account cannot be paid into a separate account.|
|Bank Australia||Interest on Bank Australia access and savings accounts is paid into the same account and cannot be paid into a separate account.|
|Bank of Melbourne||Interest from a Bank of Melbourne savings account can be paid into a different Bank of Melbourne account, but not into an account with another financial institution. Interest earned on term deposits can only be paid into the same account.|
|BankSA||Interest from a BankSA savings account can be paid into a different BankSA account, but not into an account with another financial institution. Interest earned on term deposits can only be paid into the same account.|
|Bankwest||Some of Bankwest's savings/deposit products do allow interest earned to be redirected to other accounts.|
The terms and conditions vary from product to product so it's best to contact the bank about which product is best for your needs. As an example, Bankwest’s Hero Saver option does not allow the interest earned to be credited to any other account.
|Bank of Queensland||For all the products in the BOQ savings suite, interest is credited to the same account. There is an option where you can instantaneously redirect interest once it has been paid to another account, but it pays into the savings account first.|
|Bank of Sydney||Interest is credited to the same account for most Bank of Sydney accounts, with the exception of Everyday Main accounts which can offset against a Bank of Sydney Expect More Home Loan Account.|
|Bendigo Bank||Customers with a Term Deposit account can opt to have interest paid to another account, for example a savings account.|
|Citibank||Interest earned on Citibank savings accounts must be paid into the same account, but the bank’s term deposit account will allow interest to be paid into another Citi account.|
|CommBank||While CommBank customers generally don’t elect to, they do have the option to request to have credit and debit interest automatically redirected to a different account, including:|
However, the terms and conditions can vary for individual accounts. For example, interest earned on other accounts cannot be redirected automatically to a CommBank Goal Saver Account.
|HSBC||Interest credit can only be posted to the same account earning the interest.|
|ING||Customers with ING Term Deposits can elect to have their interest paid into another account, but on variable rate savings accounts (eg. Savings Maximiser or Savings Accelerator) the interest can only be paid into that same account.|
|ME Bank||Regular interest payments on ME Bank term deposits can be made to other accounts. A customer elects a nominated account, which can be either a ME account or an external account. When interest is payable, whether it be regularly or at the end of the term, the interest can be paid into the nominated account.Interest accrued through ME’s Online Savings Account is credited to that account only. However, customers can view their balances and transactions (including interest payments), and transfer money to their nominated account via convenient methods such as internet banking, mobile app and phone banking. They can also set up a regular transfer from their Online Savings Account to their nominated account, controlling the amount and frequency.|
|NAB||With an NAB Cash Manager Account, interest is paid monthly and can be paid into the same account, or a nominated NAB account of your choosing. If you have an NAB term deposit, the interest earned can be credited to any Australian bank account.|
|Rabodirect||RaboDirect Notice Saver account holders can choose to have their monthly interest paid into a High Interest Savings Account or keep it in their Notice Saver.|
|RAMS||Interest will be paid into the same account.|
|St.George||Interest from a St.George savings account can be paid into a different St.George account, but not into an account with another financial institution. Interest earned on term deposits can only be paid into the same account.|
|UBank||Interest earned is paid directly into your UBank savings account.|
|Westpac||If customers hold a Westpac savings account, interest can be paid into a different Westpac account (i.e. a transaction account), but interest for a Westpac savings account can't be paid into an external bank account (ie NAB, CBA). The only exception to the rule are term deposits, where interest can only be paid into the same account.|
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How do I compare and choose savings accounts?
There are several factors to consider when looking for a savings account that meets all your needs, including:
- The type of account you want. If you want the security of a fixed interest rate and guaranteed returns, a term deposit could be right for you. If you’d prefer to be able to access the funds in your account whenever you need to, consider a high-interest savings account.
- Get a competitive interest rate. The higher the interest rate, the more money your savings balance will earn. However, make sure you’re aware of any terms and conditions attached to interest rates, such as requirements surrounding minimum monthly deposits and withdrawal limits.
- How the interest is paid. Check to see how often interest is paid on your account — the more often it is paid, for example monthly rather than annually, the quicker your savings balance will grow. Also check to see whether you have any options in terms of choosing which account your interest is paid into.
- Opt for low to no monthly fees. The fees and charges attached to a savings account can quickly counteract the benefits of a high interest rate. Check the fine print to see what fees apply, including monthly service fees, annual fees, transaction fees and more.
If you think having your savings interest paid into a separate account might offer an easy way for you to either draw an income or manage your finances, have a chat with your bank to find out whether this is an option they offer.