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Bonus interest saver accounts
A savings account with bonus interest can help you save more money, faster. They offer a bonus rate each month you meet a set of conditions, like depositing money or limiting withdrawals.
Earn an ongoing, variable rate of 5.5% p.a. if you deposit $1000 into a personal ING account (excluding Orange One and Living Super), make 5 eligible transactions and grow your nominated Savings Maximiser balance (excluding interest) each month. The total bonus interest rate is available on balances up to $100,000 on one Savings Maximiser account.
What is a bonus interest savings account?
A bonus saver account (or a bonus interest savings account) is a savings account that rewards you with extra interest when you meet the account conditions. These can also be known as incentive saver accounts or reward saver accounts as they incentivise you to save, and reward you with bonus interest.
Each account will have different conditions to meet in order to earn the bonus interest. This will usually include one or more of the following:
Deposit a minimum amount of money you need per month (this can range from $20 to $2000)
Make no withdrawals from the account
Link the savings account to an everyday transaction account with the same bank
Make a certain number of transactions per month
Keep your savings balance above a certain level
The conditions to earn bonus interest vary greatly from bank to bank, so it's important to regularly compare savings accounts to ensure you're always getting the best deal.
How can a bonus saver account benefit me?
A bonus saver account is designed to encourage you to save money on a regular basis. The terms used for this type of account generally come with two requirements. The first requires a minimum monthly deposit without making any withdrawals from the savings account for a given month. The second looks at the growth of the account from the first day of the month to the last and if the balance has increased by a set amount. If one of the two conditions are met, generally you can receive the bonus interest. The bonus rate is an additional percentage that’s determined by the bank and then added to their standard variable interest rate.
Do I lose the bonus interest permanently if I don't meet the conditions for one month?
No! If you haven't met the conditions for one month, you'll be eligible for the bonus interest again the following month. Any month you meet the conditions, you'll be able to receive the bonus interest.
Features to look for in an bonus interest saver account
When comparing between different Australian banks and their bonus saver accounts, think about the following features.
The amount of bonus interest you get
Each bank will offer different bonus interest rates, so make sure to look for one that offers a high bonus interest rate. It's also important to look at the total variable rate, which is the bonus rate plus the base rate.
What are the deposit conditions?
Sometimes the deposit conditions are quite strict, requiring you to deposit high amounts each month in order to earn the bonus interest rate and make no withdrawals. Other are a lot easier, with some accounts only requiring you to deposit $20 a month. whatever the conditions are, make sure you're realistic when considering the deposit requirements. If you can't realistically meet the conditions, you won't earn the bonus rate anyway.
The withdrawal conditions
Some banks will not allow any withdrawals in the month, while with others, you’re free to make withdrawals as long as you essentially return that money by meeting a monthly growth total. For example, if the goal is to save $200 in a month, and you withdraw $50, you will need to deposit at least $250 into the account before the month finishes in order to qualify for the bonus interest.
The linked bank account
Some of these accounts will be accessible only through a linked transaction account with the same bank, while others can be opened as a standalone account. If you do need to link the account to a bank account with the same bank, check that account doesn't charge too many fees.
The balance that you earn interest on
Bonus saver accounts will only pay bonus interest on balances of a certain size. Some accounts pay bonus interest on balance up to $50,000, while others pay bonus interest on balances of $250,000 or even more.
Introductory versus ongoing bonus rates
There are two types of bonus savings accounts: introductory bonus offers or ongoing bonus offers. With an introductory bonus savings account, the bonus rate is offered for a set period of time after opening the account (usually the first 4 months). There are usually no conditions to meet to earn this bonus rate as it's only available for a limited time.
Ongoing bonus rate account instead offer bonus interest ongoing each month that you meet the account conditions. So while there are conditions to meet to earn the bonus interest, you can continue to earn it month after month for as long as you have the account (and meet the conditions!).
Bonus saver accounts versus term deposits
Term deposits are another type of savings account, however they're quite different to a bonus saver account. Firstly, your money in a term deposit is locked away for the duration of the term length that you choose, which can be anywhere from 3 months to 5 years. If you want to access the money earlier you'll need to give 31 days notice, and will likely pay a penalty or lose some of your interest. Bonus savings accounts allow you to access your money instantly if you need it. However, depending on the account conditions, you might not qualify for bonus interest that month if you do make a withdrawal.
Another difference is that term deposit rates are fixed, meaning they won't change until your term length ends. Bonus savings accounts have variable rates, meaning they can change at any time. A term deposit is more of a 'set and forget' option that requires very little effort after it's opened, whereas a bonus saver will require you to meet ongoing conditions each month.
Pros and cons of bonus savings accounts
Pros
You get a higher interest rate. Bonus saver accounts give you an opportunity to boost your savings quicker with a higher interest rate than standard savings accounts.
There are usually no fees. These types of accounts typically do not have monthly account keeping fees.
Motivate yourself to save. If you need help with saving you may find that having a set monthly goal to meet makes it easier to stay on track.
Cons
There are conditions to meet. You may find it hard to continually meet the terms of a bonus saver account on a month to month basis, particularly if you get paid inconsistently.
You'll need to try and avoid making withdrawals. Unlike a transaction account, the money kept in a bonus saver account cannot be as easily accessed and used to make everyday purchases.
So, what's the best bonus interest savings account?
The best savings account is one that has conditions you can easily meet each month. There's no point getting the account with the highest bonus rate if you can't meet the conditions to earn it.
Wait, I have more questions about bonus savings accounts!
This is the same thing as a bonus saver account. It's often referred to as an incentive saver, because the bonus interest provides a good incentive to save.
Yes, with a bonus saver account each month starts fresh, which gives you the opportunity to earn the bonus interest the following month if you were unable to satisfy the conditions the previous month.
In most instances, you will need a transaction account with the same lender in order to apply for their bonus saver account. However, there are some that will allow the nominated account to be with an external bank. The transaction account allows you to transfer money to and from your account without having to visit a branch.
If you qualify, the bonus interest is applied to the balance of the month immediately following the one that met the conditions. So if you meet the account conditions in June, you'll be paid your bonus interest in July. However, please note that interest payments made do not count as a part of a deposit.
Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds.
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