What's the best Savings Account type?
What sounds like a small difference in interest rates can multuply over time and result in a bid difference in how fast your money groiws. 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
Traditional savings accounts are often used to accumulate small amounts into savings for later transfer to another account. The base interest rates begin low (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. Compare savings accounts offers from banks and non-bank institutions like credit unions and building societies because some have higher bonus rates than others.
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. With high interest online savings accounts you normally get the same high interest rate on every cent in your account rather than a tiered rate.
Kids 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. It is common for these accounts to provide access to bank branch facilities; the idea is to enable children to enjoy the banking experience in the same way as their parents. 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. Another thing is that interest rates are tiered and the highest advertised rates only apply to 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 co-founded banking comparison website www.compareyourbank.com.au which compares leading savings products including ANZ Smartypig. Rates and terms can be compared before applying with the banks.
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