Savings accounts interest rates up to 5.65%

The RBA left the cash rate on hold for the fourth month in a row in October.

Despite this, savings account interest rates remain high. RateCity’s database shows nine banks with maximum interest rates of at least 5.50%, while a host of others are offering rates above 5%. 

If the RBA chooses to raise the cash rate, competition for deposits could see more banks offering even greater returns. However, of the Big Four Banks, only NAB forecast another hike this year. Even if it does come off, it’s likely to be the last increase in this tightening cycle. This means that the cash rate may officially peak at either 4.10% or 4.35% in 2023, before possible cuts in 2024. 

With this in mind, you may want to carefully consider whether a savings account or a term deposit may be the best solution to help you reach your saving goals. Term deposits can offer stability, but a savings account could provide more flexibility.

If you feel like you're missing out on a higher rate and want to see how your existing savings account stacks up, compare some of the savings accounts with the highest rates on the RateCity database:

• ME Bank HomeME - 5.65%
• Rabobank High Interest Savings Account - 5.60%
• Hiver Target Saver - 5.50%
• BOQ Future Saver Account (Under 35) – 5.50%
• Move Bank Growth Saver Account – 5.50%

Updated by Mark Bristow on 4 October 2023.

A savings account is a type of bank account where you deposit your money so it can earn interest. Generally, interest is calculated daily and paid monthly. The rate of interest is influenced by the Reserve Bank of Australia’s (RBA’s) cash rate.

Whether you’re planning a holiday or saving for a house deposit, savings accounts offer a simple, low-risk way to boost your nest egg. To help you reach your savings goals, learn how to choose the right account for your needs and what interest rate to look for.

Savings accounts use compound interest to help you reach your savings goals. Compound interest on high interest savings accounts is typically calculated daily and paid monthly.

Compound interest can help accelerate your savings because you earn interest on the money you initially deposit, as well as the interest you’ve already earned. Essentially, you’re earning interest on interest.

Also, making additional deposits can seriously transform your savings thanks to compound interest.

For example, if you deposit $1,000 into a savings account earning 2 per cent interest over five years, your deposit would grow to $1,105. If you also made monthly deposits of $200, your deposit would grow to $13,715 thanks to compound interest. 

Source: MoneySmart

Here’s what to consider when shopping around for a savings account:

The main benefits of a savings account are the simplicity and the low risk. You’re not investing anything, so your money can simply sit in the account and earn interest. It’s also safer than hiding cash under your mattress, as it can’t be easily stolen or damaged.

Another low-risk option is to park your savings in a term deposit. These are similar to savings accounts, however once you’ve deposited your money, you can’t easily withdraw the funds until the end of a fixed term. The interest rates are also fixed in advance, so it’s simpler to calculate the interest you’ll earn over time.

Term deposits can be a competitive option for anyone prone to dipping into their savings, as you can lock away your money to earn interest at a fixed rate, making slow and steady progress towards your savings goals. While it is possible to end your term deposit early to access your money if you need it, you’ll likely need to provide plenty of advance notice (often at least a month), may miss out on interest income, and may also need to pay an early withdrawal fee.

Keep in mind that there is more to a savings account than just its interest rates. If the account has high fees, it may end up costing you more than you expect. Further, if the high interest rate on your account comes with conditions, be prepared to meet them or you may miss out. 

Real Time Ratings™ may be able to help you get a better idea of each savings account’s overall value. These simple star ratings combine an interest score (based on the maximum rate and any account keeping fees) with a flexibility score (based on features like ATM/Eftpos access, banking access, transaction fees and availability of joint accounts), and are calculated in real time as you use the site, making them as up to date as possible.

Just because savings accounts are considered low risk, doesn’t mean there aren’t common mistakes you can make.

Falling for introductory rates

Some people are shocked when they sign up for a savings account and later on, discover they’re earning less interest than was advertised. Some savings accounts can offer higher introductory rates for a few months to attract new customers, which can then revert to much lower ongoing rates. If you’re not careful, this low rate may be buried in the fine print. Do your research before applying for any savings account. 

Not meeting conditions

If you’re not meeting your conditional savings account’s requirements, you may be missing out on some serious savings. In some instances, the base rate of the savings account may be zero or just above it. Making this mistake time after time could cost you years towards your savings goals.

Big savings but little risk

Ironically, another way some people misuse savings accounts is to deposit too much money. Savings accounts often deliver lower returns than other investments, and some have a maximum balance limit. Once your balance reaches a certain amount, it might be worth considering withdrawing some of the money to invest elsewhere. Just make sure you understand the higher level of risk associated with your new investment.

High fees

Some savings accounts can charge higher than average fees. Children’s accounts, for example, are known for offering high interest rates but charging high fees to compensate. Use comparison tables and savings calculators before you apply for any savings account to make sure you aren’t taking steps backwards in your savings journey due to costly fees.  

Many lenders offer joint savings accounts, which give two or more people access to the one account. 

You can open a savings account online in just a few minutes, or you can visit a bank branch. You’ll need to provide identification and contact details for both parties, as well as your tax file numbers if you don’t want to be taxed at the maximum rate. Just fill in the application and submit it to the savings account provider of your choice. 

Joint accounts are often used by people in romantic relationships, although they can also be used by friends or relatives who want to pool their savings. It’s important to only open a joint savings account with somebody you trust, as they will be able to withdraw any money you deposit in the account.