What is an online savings account?
An online savings account is an account that you can open and manage online, without needing to go into a bank branch or physical store. You can access your savings balance via Internet banking or the mobile banking app provided by the bank. Plus, you get the flexibility of the internet, so you can access your money 24/7.
Most savings accounts today can be classed as an online savings account, as the majority offer Internet banking and mobile banking. Generally speaking, the best online savings account for you is one with a great interest rate, monthly account conditions you can meet and a mobile app or Internet banking platform that has the features you're looking for.
How do online savings accounts work?
Online savings accounts are designed to help you save money, offering interest on your balance when you keep it in the account. Most accounts will have some monthly conditions to meet to earn a higher interest rate, for example a monthly deposit goal. You can deposit money into your savings account online by transferring it from your everyday bank account. You can also set up direct debits into your savings account if you want to, for example your pay.
Online savings accounts do not come with a debit card, so the only way to access your money is by transferring it to your transaction account using Internet banking or mobile banking. Once you've moved the money to your bank account you can then make purchases using your debit card, shop online or withdraw cash at ATMs.
It's a good idea to link a bank account to your savings account with the same bank. This way, you can easily see both accounts side by side in your mobile banking app, and easily move money between accounts.
Online savings account fees
Online accounts usually don't attract any transfer fees or monthly account-keeping fees, so they offer an inexpensive way to build savings. However, you might be charged account keeping fees on your linked transaction account so be sure to watch out for this.
Online savings account interest rates
Online savings accounts have variable interest rates, meaning they can change at any time with little or no notice. They usually offer a standard interest rate (which you'll earn each month as a minimum), and a bonus interest rate (which you'll earn on top of the standard rate when you meet the conditions). Take a look at the comparison table above to see some of the current interest rates offered on online savings accounts.
Interest on the balance is calculated daily, and deposited into the account at the beginning of the following month.
How to deposit money into an online savings account
There are a few ways to deposit money into your account:
- Via your bank account. You'll usually need to link your savings account to a bank account, and deposit money into your bank account before transferring it into your savings via Internet banking or mobile banking.
- Bank@Post. A lot of Australia Post shops offer Bank@Post which allows you to deposit cash at the office into your bank account, without visiting a branch (you'll still need to transfer it from your bank account into your savings account online).
- In a branch. If your bank does have physical branches, you can choose to deposit cash into your account via a bank branch or smart ATM.
- Direct debit. You can electronically send money to your account via direct debit (e.g.: your salary).
Benefits of online savings accounts
Online savings account offer a range of benefits, including:
You can usually link your online savings account to your regular Australian bank account
Many online banks make it easy to transfer money to and from your linked account. However, some will only let you link a bank account from the same institution. This means that you might have to open a new bank account just for your online savings account.
You get 24/7 access to your money
One of the best aspects of an online savings account is that you can usually access your money whenever you like. While the accounts are all accessible online via a web browser, most banks make it even more convenient with mobile banking apps. These allow you to monitor your savings activity even when you are on the go.
Your money is safe
Your deposit up to $250,000 in a savings account with an Australian bank is guaranteed by the Australian Government, under the bank guarantee scheme.
You get a competitive interest rate
High interest savings accounts usually offer a higher interest rate than standard savings accounts, helping your balance grow. Some of these accounts offer bonus interest each month you meet the account conditions.
There are no fees
Generally, an online savings account does not attract any monthly account-keeping fees or transaction fees. Avoid accounts that charge monthly maintenance fees, statement fees and ATM charges.
$0 minimum deposit requirements
Some banks may require that you make a minimum deposit when first opening the account, or on an ongoing basis. Understand what you can and can't commit to in terms of deposits to choose the account that's best for you.
Flexible transaction limits
Check how many withdrawals you can make per month and how much you can take out. Your daily transfer limit may be capped around the $10,000 mark; you may be able to adjust this by calling the bank.
The downsides of online savings accounts
There are plenty of benefits, but there are also some drawbacks of an online savings account.
- Needs to be linked to a bank account. Although you won’t have any fees on the account, there may be fees associated with the linked account used to manage it.
- Can be delayed if funds are from different banks. Funds transfers may not be instant if they are coming from a separate financial institution.
- Less branches. Some banks are completely online (like ING and ME Bank) and have no bank branches available, and other banks are also reducing their branch numbers. This could be an issue if you do a lot of your banking in a branch.
Online savings account FAQs: The most common account questions answered
Do I get instant access to transferred funds?
If your online savings account is linked to a transaction account from the same institution, then you generally do get instant access. However, if the money comes from a different financial organisation, it usually takes up to three business days for the funds to appear in your account.
Can non-residents open an online high-interest savings account in Australia?
No. Even though the account is based online, the account holder must be a resident of Australia with an Australian residential address.
Are the accounts available for businesses?
There are business savings accounts designed specifically for businesses. Business owners need to apply for one of those rather than an account which is structured for personal use only.
Will I have to pay taxes on the interest earned on an online savings account?
Yes, interest is considered income and must be included in your annual tax return. Whether you will have to pay tax on it depends on the amount, your income and your personal circumstances.
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