What's the best Savings Account type?

Posted on June 14, 2009 @ 9:45 pm

Small differences in interest rates on your savings can result in significant increases on interest earnings. This alone becomes a compelling reason to compare savings accounts, for there are many types. But aside from the high interest savings accounts can provide (compared to ordinary transaction accounts), they operate under different terms and conditions which also influence the net return you receive and the conveniences you enjoy. You will need to compare savings accounts features with your banking needs to determine if you have the right savings account.

Savings Accounts

These traditional savings accounts can be useful for pulling together savings which you then shift across to a higher interest account. Interest rate starts at a low base rate (a 0.01 per cent basic rate is fairly standard). You can make them earn like a high interest savings account if you follow certain conditions which will qualify you to a bonus rate. The conditions include making a minimum deposit each month and/or avoiding any withdrawals during the month. You will need to keep a minimum balance in the account otherwise fees will be imposed. Look beyond the big banks and look at the smaller banks and non-bank providers such as building societies and credit unions who may offer higher rates.

Online Savings Accounts

Banks and financial institutions find online savings accounts very economical to operate. By cutting the costs and overheads the savings get passed on as higher returns with online saving accounts. For consumers like you, online savings accounts allow you to access banking services on 24/7 basis. Online savings accounts allow you to transfer money to and from a linked transaction account in the same bank or in another — although having the two accounts in the same bank makes the transfers instantaneous. Make sure to compare savings accounts since interest yields are higher in some banks. However, interest rates are not tiered and you get the same rate regardless of the balance in your online high interest savings accounts.

Children’s savings accounts

These are high interest savings accounts designed to encourage your children to become savers. These accounts are similar to many traditional saving accounts in that they start with a fairly low base rate of interest and provide tiered rates of interest that get higher with larger balances. Fees are usually very low so as not to dampen your children’s enthusiasm for saving. Typically these types of accounts offer full in branch access with the idea that children get to see their savings being handed over and used to the banking process. Children also acquire a direct sense of ownership because their names appear in all account records.

Cash management accounts

These accounts can serve as a transaction account but at the same time they act like high interest savings accounts. Interest is computed on a daily basis and paid into the account monthly. One caveat, though: the high interest savings accounts rates will apply only if the initial deposit to open it is substantial. Compare savings accounts terms carefully because some banks accept $1000 but others require as much as $5000 initial deposit. In addition, interest rates are tiered and the best rates are reserved for higher balances. For smaller balances, you have to compare savings accounts rates with other types. If balances are high enough, fees may be waived.

In summary; when your choosing a savings account you should check the following things before you go ahead and apply

• Duration of and conditions to qualify for bonus rates
• Requirements on minimum balance, deposits, fees and charges
• Limitations on number of withdrawals
• Requirements on linking of transaction accounts
• Conditions on linking of accounts if one of the linked accounts is in another institution.

Article by Richard Greenwood who operates banking comparison website www.compareyourbank.com.au which compares leading savings products including St.George Direct Saver. Rates and terms can be compared before applying with the banks.







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