The traps stinging savers with money in the bank
SaverS have not only been hit by falling interest rates but they are getting caught out by sneaky account terms and conditions.
The Reserve Bank of Australia cut the cash rate to 0.1 per cent this month which was welcomed by borrowers, but it has taken a further toll on savers.
The Commonwealth Bank last week slashed its popular savings and term deposit account interest rates by up to 0.2 percentage points.
This follows many other lenders who also recently took the knife to savings account rates including Macquarie Bank, HSBC, ING, AMP, Suncorp, ME and UBank.
Financial comparison website RateCity's database shows the big four banks are offering interest rates at 0.75 per cent or less, giving savings little incentive to keep their cash in the bank.
The big four bank's standard savings account ongoing rate is just 0.05 per cent.
Their analysis also shows across the savings market the average savings rate is just 0.48 per cent.
These are some of the key things savers need to watch out.
While most savings accounts are fee free, Tribeca Financial's chief executive officer Ryan Watson says you must check you aren't getting hit with unnecessary charges.
"Fees can become an investment return killer," he says.
"As such, you need to find a bank provider which carries little to no fees.
"Putting more money back in your pocket over the journey."
2. HONEYMOON RATES
Banks lure in customers by offering attractive honeymoon interest rates that usually only last a few months and Watson says you need to watch out for this.
"One of the best ways to do this is to move your money around between banking providers after the interest rate 'honeymoon' period has finished," he says.
"This will dramatically increase your rate of return."
3. BALANCE AMOUNTS
RateCity's spokeswoman Sally Tindall says there are often limitations on minimum and maximum deposit amounts held in savings accounts to ensure you get the account's best interest rate.
"Savers often get caught out by interest rates that change if you've got too much or sometimes too little in your savings account," she says.
"For example Westpac is offering a market-leading rate of 3 per cent on its Life Saver account but only for people aged between 18 and 29 who meet the terms and conditions and have less than $30,000 in their account."
Check the balance requirements to make sure the amount you have fits the account criteria.
4. MINIMUM DEPOSITS
Some accounts require the customer to make a minimum deposit each month and if you don't you will miss out on the best interest rate available Tindall says.
"In some cases you might need to make a monthly deposit into your savings while others might ask you to make regular payments using a linked transaction account," she says.
"This might seem like an odd demand for a savings rate but what they really want is for you to start using them as your primary bank."