High Interest Savings Accounts

High Interest Savings Accounts
The rate rises made by the Reserve Bank of Australia may
have become cause for concern among those facing mortgage
repayments. However, the associated increase in cash rates
has positive impact on savings interest rates, and those
who have some cash to spare can place their money in high
interest savings accounts.

The market for high interest savings accounts, which
usually are online savings accounts, has grown tremendously
in the past five years. Competition has really picked up in
the market and some banks have offered to pay savings
interest rates several points above the official RBA cash
rate.

If you're planning to open a high interest savings account,
here are some things you should watch for in the product
brochures.

Savings Interest Rate: Note that the savings interest rate
for high interest savings account is a variable rate,
subject to change depending on RBA rate announcements. It
is possible that the high savings interest rate offered in
the brochure may apply only during a limited introductory
period. After the specified period, the savings interest
rate will revert to the normal rate. Check both the
introductory rate or bonus rate and the normal savings
interest rate so you don't get any surprises.

Minimum balance or minimum deposit: Some high interest
savings accounts are designed to induce you to save
regularly but discourage withdrawals in order to build up
the money in the account. To this end, you may have to make
a minimum deposit every month (say, $50) but there is also
a ceiling (say, $500). For other institutions, they may
require that a minimum balance be kept in a linked
transaction account (or regular savings account) for your
high interest savings account to earn the offered high
savings interest rate. Some banks require as much as $5000
as minimum balance in your transaction account before your
high interest savings account starts to earn. Failure to
keep the required minimum balance in the linked account
will reduce the earnings potential in the high interest
savings account.

Limits on withdrawals: One other condition that may be
imposed is a restriction on withdrawals. Most institutions
stipulate that no withdrawals should be made from the high
interest savings account.

Fund Transfer Interval: If the online high interest savings
account and its linked transaction account are maintained
in the same bank, you will have no problem with fund
transfers, as these will be done immediately. However, if
you have different banks for each one, you will have to
plan ahead. It may take as little as 2 days before your
online high interest savings account gets credited for the
transfer.

If your volume of transactions is minimal and you want to
earn more on your savings account, you may not like the
required link to a transaction account, with its monthly
keeping fees and minimum balances. You could study the
possibility of opening a standalone Internet savings
account. There are several of these available.

You may have to spend time reading through all the fine
print and doing the sums to compare features among
different high interest savings accounts. The effort will
help you find the products that gives you high savings
interest rate plus the conditions that fits your needs best.

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Richard Greenwood is Director of
http://www.high-interest-saving-account.com.au which
compares savings accounts in Australia.