Borrowers welcomed the Reserve Bank’s decision to slash the cash rate to a new low of 1.75% last week. However, the decision came as bad news for savers, who will forgo a significant amount of interest earned on deposit and savings accounts – $778.4 billion, to be exact.
Since the Reserve Bank’s board meeting, seven lenders announced rate changes for savings and term deposit accounts and, according to recent research from finder.com.au, one of Australia’s largest comparison websites, if this trend continues, Australian households will pay the price and lose nearly $1.9 billion in interest on savings.
Assuming the 0.25% interest rate cut is passed on to the $778.4 billion on-deposit funds sitting in Australian banks, this would eliminate $1.94 billion in interest over a year. At a household level, this equates to an average loss of $210 in interest.
With seven lenders announcing rate reductions to savings accounts in the past week, many banks are likely to follow suit in the weeks to come. As a result, savers must practise due diligence when it comes to managing savings and transaction accounts.
If your bank is yet to announce a rate change, contact your lender directly or monitor its website or social media platforms to find out more.
Additionally, if you’re not satisfied with your savings or term deposit account, or if your lender passes on the full cut, it may be time to compare different accounts online to secure a competitive rate.
If you’re in the market for a savings account, compare accounts from several banks, building societies and credit unions to ensure that you’re getting a good deal. To get the most out of your account, pay attention to the fees, terms and conditions.
To be eligible for the maximum rate (including bonus interest), you typically need to make a minimum deposit and no withdrawals each month. Get into a routine of making regular deposits into your account by setting up an automatic transaction to deposit your salary iinto the account.
The table compares some high-interest savings accounts:
|High-interest savings account||Maximum interest rate|
|ME Online Savings Account||3.35%|
|Citibank Online Saver||3.40%|
|St.George Maxi Saver||3.20%|
|Bank of Melbourne Maxi Saver||3.20%|
|BankSA Maxi Saver||3.20%|