Savings accounts that restrict access to your funds can help make it easier to grow your savings balance.
Do you have trouble saving money? Is the temptation of having all that money sitting there too great to resist, prompting you to dip into your savings balance whenever you get a bit short on cash?
If this sounds like you, a savings account that doesn’t allow you to withdraw money could offer the solution to your savings problem. These accounts, such as term deposits and bonus saver accounts, place a range of restrictions on how and when you can access your money. This stops you from eating away at your balance and acts as a form of enforced saving.
So could a term deposit or a bonus saver account be right for you?
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Savings accounts are packed with features to help you save money and grow your balance as quickly as possible. They offer high interest rates, charge minimal fees, and typically include a range of incentives to encourage you to not touch the money in your account. Some banks also reward you for making regular deposits into your account, for example by offering bonus interest.
As the name suggests, savings accounts are designed to help you save money, not spend it. If you want an account that allows easy access to your money, we suggest opening an everyday transaction account. Transaction accounts charge no or minimal transaction fees, allowing you to access your funds via Internet, mobile and phone banking, and do things such as pay bills via BPAY, buy goods using EFTPOS and withdraw money at ATMs.
But if you’re looking for a savings account with restrictions in place to stop you chipping away at your balance any chance you get, there are two types of accounts that could benefit you: term deposits and bonus saver accounts.
What are term deposits?
A term deposit lets you lock your money away for a set period and earn a fixed interest rate. Terms usually range from three months through to five years, and while your money is invested, you can’t access it without incurring a hefty penalty.
There are a couple of key benefits to term deposits. First, you get the security of a fixed interest rate and a guaranteed return on your investment. If interest rates drop while your money is locked away in a term deposit, you won’t be affected.
Second, these accounts are set up in a way to discourage you from dipping into your savings balance. You typically can’t access the funds in a term deposit without having to pay a sizable fee, so any money you deposit is safe from the risk of impulse buying and unnecessary spending.
On the other side of the coin, term deposits are not all that convenient if you ever need fast access to your funds in an emergency, and you also won’t be able to benefit from any interest rate rises that occur until your deposit matures.
Who offers term deposits?
Term deposits are an extremely common account option at banks, building societies and credit unions all across the country. Online-only banks such as RaboDirect and ING Direct also offer term deposits with competitive rates. Make sure that you compare a wide range of options to find the account with the best interest rate and terms and conditions for your needs.
To give you an idea of the products available, the table below shows the term deposit accounts available from Australia’s Big Four Banks as at 26/05/2016.
|3 months||4 months||6 months||7 months||12 months||24 months||36 months||48 months||60 months|
|Westpac||2.10% p.a.||2.00% p.a.||2.20% p.a.||2.00% p.a.||2.50% p.a.||3.00% p.a.||3.10% p.a.||2.70% p.a.||2.85% p.a.|
|CommBank (for amounts $5,000 - $9,000)||1.90% p.a.||-||-||1.90% p.a.||1.90% p.a.||-||1.90% p.a.||-||1.90% p.a.|
|ANZ (for amounts from $5,000 to $100,000)||1.90% p.a.||-||1.95% p.a.||-||2.05% p.a.||2.35% p.a.||2.40% p.a.||2.45% p.a.||2.65% p.a.|
|NAB (for amounts from $5,000 to $49,000)||2.10% p.a.||1.75% p.a.||2.10% p.a.||2.05%||2.40% p.a.||3.10% p.a.||3.20% p.a.||2.75% p.a.||2.80% p.a.|
How do I compare term deposits?
Consider the following features when comparing the pros and cons of term deposit accounts:
- The interest rate. As the table above shows, interest rates can vary greatly between banks and depending on the term you choose. Look around for the best interest rate you can find – but make sure there are no unexpected fees attached.
- When interest is calculated. Check to see whether interest is calculated on the account monthly, quarterly or yearly. The more often interest is calculated, the more your balance will grow.
- Compare the terms and conditions. When comparing accounts, make sure you evaluate the features of accounts with the same term – i.e., only compare six-month term deposits with other six-month term deposits. If your bank doesn’t offer the term you want, look elsewhere.
- Check for any hidden account fees. Are there any ongoing fees attached to the account? Also, it’s worth checking what sort of fee you will incur if you need to withdraw your money before the term ends.
- Check where interest is paid on maturity. Is the interest you earn paid back into the same account or into a different account? Do you need to open a linked account with the same financial institution to receive interest payments?
- Are there loyalty bonuses? If you want to re-invest your money into another term deposit after your first deposit matures, will you be rewarded for your loyalty with a bonus interest rate?
What are bonus saver accounts?
Bonus saver accounts are designed to reward you for your discipline in saving. If you make regular deposits into your account and/or limit your withdrawals, you will be rewarded with the ability to earn bonus interest on your balance.
Also known as conditional savings accounts or reward saver accounts, bonus savers allow you to earn two types of interest: standard interest and bonus interest. The standard interest rate applies to your account at all times and could be as low as 0.01% p.a.
The bonus interest rate only applies when you meet certain terms and conditions, and it can help you earn a very competitive rate of interest on your savings balance. In order to activate this bonus interest rate each month you will need to satisfy certain requirements, which may include:
- Depositing a specific minimum amount into your account each month.
- Making a minimum number of deposits each month.
- Making no or limited withdrawals each month.
- Maintaining a minimum account balance.
- Opening a linked transaction account and using it to perform a specific number of transactions each month.
The main benefit of bonus saver accounts is that they reward you for good financial discipline and putting money away regularly, and they discourage you from dipping into your savings balance all the time.
Unlike a term deposit, a bonus saver account lets you take advantage of interest rate rises, but you will also feel the effect of any interest rate drops.
By scheduling an automatic transfer from your salary into your savings account each month, you can quickly build a sizable savings balance. Our savings calculator will help you work out just how much interest you can earn.
On the flipside, there’s always a risk of missing out on the bonus interest rate if you fail to meet the terms and conditions in any given month. So if you get an unexpected expense and need to withdraw a sizable sum from your account, you’ll only earn the much lower standard interest rate for that month.Back to top
Who offers bonus saver accounts?
Just like term deposits, bonus saver accounts are offered by banks, online-only banks, building societies and credit unions across Australia. The table below lists some examples of bonus saver accounts:
|Account||Maximum interest rate available||Base interest rate||Bonus interest rate||Terms and conditions|
|Bankwest Hero Saver||2.65% p.a.||0.01% p.a.||2.64% p.a.||Must not make any withdrawalsMust deposit at least $200 per monthAvailable on balances up to $250,000|
|Westpac Reward Saver||1.85% p.a.||0.01% p.a.||1.84% p.a.||Must deposit at least $50 per month and not make any withdrawals|
|ANZ Progress Saver||1.91% p.a.||0.01% p.a.||1.90% p.a.||Must deposit at least $10 per month and not make any withdrawals|
|CommBank GoalSaver||1.95% p.a.||0.01% p.a.||1.94% p.a.||Must not make any more than one withdrawal per monthMust grow your balance by at least $200 each calendar monthAvailable on balances up to $100,000.|
|NAB Reward Saver||2.70% p.a.||0.50% p.a.||2.20% p.a.||Must make at least one deposit and not make any withdrawals each month|
|TM Bank Reward Saver||2.61% p.a.||0.10% p.a.||2.51% p.a.||Must make no withdrawalsMust deposit at least $50 each monthMust have a credit balance at all times|
|St.George Incentive Saver||1.85% p.a.||0.01% p.a.||1.84% p.a.||Must make no withdrawalsMust make at least one deposit each month|
How do I compare bonus saver accounts?
Make sure to compare the following when researching the benefits of bonus saver accounts:
- Research the maximum interest rate you can earn on each account. However, remember that you will only earn this high rate if you satisfy all the account terms and conditions each month, so check out the base interest rate that will apply if you miss a deposit or make too many withdrawals.
- Check if there are deposit requirements. Is there a minimum amount you need to deposit each month in order to receive the best rate? Also check to see whether there is a minimum deposit required to open an account.
- Check if there are limits on the number of withdrawals you can make. Many accounts will limit the number of withdrawals you can make each month and this limit could possibly be as low as zero. If you fail to meet this requirement, you won’t earn any bonus interest for that month.
- Linked account requirements. Some banks will require you to also open a linked transaction account with them in order to also open a bonus saver account. If this is the case, make sure the transaction account is suited to your needs and doesn’t have any hidden fees.
- Check for any hidden account fees. Exorbitant bank fees can quickly defeat the purpose of any bonus interest earned on an account, so read the fine print to make sure you’re aware of any ongoing fees, withdrawal fees and other transaction charges.
- How accessible is your cash? Check to see whether your account can only be managed online or whether you also have branch and phone banking access. Easy accessibility to customer service and support is another important factor.
Term deposits and bonus saver accounts can both offer many benefits to people who struggle to save money. Make sure you research the benefits and drawbacks of both types of accounts before deciding if either one is right for you.