High Interest Savings Accounts
High Interest Savings Accounts The rate rises made by the Reserve Bank of Australia may have become cause for concern among those facing mortgage repayments. However, the associated increase in cash rates has positive impact on savings interest rates, and those who have some cash to spare can place their money in high interest savings accounts.
The market for high interest savings accounts, which usually are online savings accounts, has grown tremendously in the past five years. Competition has really picked up in the market and some banks have offered to pay savings interest rates several points above the official RBA cash rate.
If you're planning to open a high interest savings account, here are some things you should watch for in the product brochures.
Savings Interest Rate: Note that the savings interest rate for high interest savings account is a variable rate, subject to change depending on RBA rate announcements. It is possible that the high savings interest rate offered in the brochure may apply only during a limited introductory period. After the specified period, the savings interest rate will revert to the normal rate. Check both the introductory rate or bonus rate and the normal savings interest rate so you don't get any surprises.
Minimum balance or minimum deposit: Some high interest savings accounts are designed to induce you to save regularly but discourage withdrawals in order to build up the money in the account. To this end, you may have to make a minimum deposit every month (say, $50) but there is also a ceiling (say, $500). For other institutions, they may require that a minimum balance be kept in a linked transaction account (or regular savings account) for your high interest savings account to earn the offered high savings interest rate. Some banks require as much as $5000 as minimum balance in your transaction account before your high interest savings account starts to earn. Failure to keep the required minimum balance in the linked account will reduce the earnings potential in the high interest savings account.
Limits on withdrawals: One other condition that may be imposed is a restriction on withdrawals. Most institutions stipulate that no withdrawals should be made from the high interest savings account.
Fund Transfer Interval: If the online high interest savings account and its linked transaction account are maintained in the same bank, you will have no problem with fund transfers, as these will be done immediately. However, if you have different banks for each one, you will have to plan ahead. It may take as little as 2 days before your online high interest savings account gets credited for the transfer.
If your volume of transactions is minimal and you want to earn more on your savings account, you may not like the required link to a transaction account, with its monthly keeping fees and minimum balances. You could study the possibility of opening a standalone Internet savings account. There are several of these available.
You may have to spend time reading through all the fine print and doing the sums to compare features among different high interest savings accounts. The effort will help you find the products that gives you high savings interest rate plus the conditions that fits your needs best.
About the Author:
Richard Greenwood is Director of www.high-interest-saving-account.com.au which compares savings accounts in Australia.
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