Yahoo Finance Banks slammed for ‘complex’ savings rates as Aussies miss out on extra cash
Aussies face substantial barriers to finding and switching to a savings account with a better interest rate, a new report has found.
Aussies are missing out on earning higher interest on their savings due to an “opaque” and “complex” banking system, the consumer watchdog has found.
The Australian Competition and Consumer Commission (ACCC) released its final report into retail deposits today and found there were ongoing barriers stopping savers from finding and switching to a better deal.
The report found banks used “strategic pricing” for their retail deposit products, including introductory and bonus interest rates, and a range of fees and charges, making it hard for people to compare.
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Banks also split their customers up by different product designs and conditional interest rates, meaning there could be a big difference between interest rates, even within the same bank.
Aussies have at least $1.4 trillion held in bank deposit accounts. Of those, 89 per cent are held with the Big Four banks - Commonwealth Bank, Westpac, ANZ and NAB - and six mid-tier banks.
The report made a number of recommendations, which would help Aussies make sure they were maximising their savings. This included getting banks to notify customers about interest rate changes and alerting them if they were about to lose their bonus interest.
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“During our inquiry, we were concerned that several banks could not tell us how many of their customers had missed out on bonus interest, or which specific condition they failed to meet,” ACCC chair Gina Cass-Gottlieb said.
“While high headline interest rates may seem attractive to customers, they can come attached with conditions that are hard for customers to meet and keep track of.”
The report, which was ordered by Treasurer Jim Chalmers earlier this year, found 71 per cent of bonus accounts did not qualify for the higher bonus rate each month, based on analysis done in the first six months of this year.
Aussies urged to compare and switch
RateCity research director Sally Tindall said Aussies should take the time to compare their savings account this summer.
“While most savings accounts are likely to be sending you backwards, once you factor in the costs of both tax and inflation, it’s important to make sure your nest egg is working as hard as possible,” Tindall told Yahoo Finance.
She recommended people consider what type of account would suit their finances and lifestyle - whether that be an introductory, bonus or ongoing savings account, plus the terms and conditions.
“Some people will be able to meet their bank’s monthly terms and conditions with their eyes shut, [others] will end up twisting themselves and their finances into contortions just to make it work,” she said.
RateCity found there are now 37 savings accounts offering ongoing rates of 5 per cent or more, however 34 of these have monthly terms and conditions.
Here are the top five ongoing savings rates available:
Account | Highest ongoing rate | Max balance for max rate | Monthly conditions |
MOVE Bank Growth Saver | 5.70% | $25,000 | Deposit $200 into savings account and make no withdrawals |
Me Bank HomeME | 5.55% | $100,000 | Deposit $2k into linked bank account and grow savings |
Australian Unity Freedom Saver | 5.50% | $50,000 | None |
Teachers Mutual Bank | 5.50% | $5 million | Deposit $1k into linked bank account and make no withdrawals |
ING Savings Maximiser | 5.50% | $100,000 | Deposit $1k and make 5+ transactions per month into linked bank account, plus grow savings. |
Source: RateCity
Banks not passing on RBA rate hikes to savers
The ACCC report also looked into the impact of the Reserve Bank’s (RBA) cash rate target on savings account interest rates.
It found increases only “indirectly” affected deposit funding costs and rates. When setting interest rates, banks are also considering other factors, like funding requirements, profitability, economic and regulatory factors, and the competitive landscape.
Tindall said banks had been “picking and choosing” which savings accounts received an increase and which ones missed out.
“Even within those accounts that get a boost, often it is to the bonus rate, which some customers don’t always qualify for,” Tindall said.
“For example, the RateCity.com.au database shows that, since the start of the hikes in May 2022, the average base rate across all savings accounts has risen by just 1.25 percentage points.”
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