Deposits in savings accounts are being eroded by inflation as banks continue to slash interest rates - but there are still some savings accounts on the market with good rates. A key component of savings account interest is the base rate.
This article will explain what a base rate is, how it’s different from other savings account rates, and why it’s important to keep your savings interest rate above inflation, which is getting harder to do.
Compare savings accounts with the highest base rate
The table below displays a selection of some of the highest base rates on savings accounts.
Provider | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 4 | 0 | 0 | 0 | $product[$field["value"]] | $product[$field["value"]] | $product[$field["value"]] | More details | ||||||
| FEATURED | High Interest Savings Account (< $250k)
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High Interest Savings Account (< $250k)
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| 4 | 0 | 0 | 0 | $product[$field["value"]] | $product[$field["value"]] | $product[$field["value"]] | More details | ||||||
| FEATURED | Savings Account (Amounts < $250k)
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Savings Account (Amounts < $250k)
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| 0 | 1000 | 0 | $product[$field["value"]] | $product[$field["value"]] | $product[$field["value"]] | More details | |||||||
| FEATURED | Saver Account (<$250k)
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Saver Account (<$250k)
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| 0 | 200 | 0 | $product[$field["value"]] | $product[$field["value"]] | $product[$field["value"]] | More details | |||||||
| No monthly fees | Save Account
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Save Account
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What is a base interest rate?
A base interest rate is the default interest rate that all account holders will earn on a particular savings account.
According to Savings.com.au’s research, the highest base rate on the market is currently 3.50% p.a. for a children’s savings account, which tend to have higher interest rates than adult savings accounts. The highest base rate for an adult savings account is currently 1.20% p.a, while the average base interest rate for most savings accounts is generally between the 0.50% to 0.80% mark. If you’re a customer of the big four it’s even worse, as the average base rate on savings accounts across the big four banks is just 0.05% p.a at the time of writing.
If that sounds pitifully low it’s because it is. Interest rates on savings accounts have been plunging over the last couple of years thanks to multiple cash rate cuts by the Reserve Bank. Since 2019, the cash rate has been cut six times. As of March 2021, the cash rate is just 0.10%, while the current rate of inflation is 0.90%.
This means that if the total interest rate on your savings account is lower than 0.90% p.a, your money is basically going backwards. Savings that aren’t growing at or above the rate of inflation results in your money essentially decreasing in value over time.
See also: How inflation affects your term deposit and savings account returns.
How are base interest rates different from bonus interest rates?
A bonus interest rate is usually offered on top of the base rate, either as an introductory rate (also known as a honeymoon rate) or as a conditional rate, which you can only earn by meeting certain conditions like:
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Depositing $X amount of money into your savings account every month
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Making no or limited withdrawals every month
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Making a certain number of transactions every month using the linked transaction account
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Having a linked transaction account with a certain amount of money deposited into it every month
Sometimes you may have to meet a combination of these requirements to earn the bonus rate.
The table below displays a selection of savings accounts with some of the highest bonus rates on the market (age limits may apply).
4 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details FEATURED High Interest Savings Account (< $250k)
High Interest Savings Account (< $250k)
0 1000 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details FEATURED Saver Account (<$250k)
Saver Account (<$250k)
4 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details FEATURED Savings Account (Amounts < $250k)
Savings Account (Amounts < $250k)
0 200 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details No monthly fees Save Account
Save Account
0 2000 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details HomeME Savings Account ($0 - $100,000)
0 1000 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Boost Saver
0 100 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Bonus Saver Account (Amounts < $100k)
3 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Everyday Savings Account
5 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details NetBank Saver
3 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Maxi Saver
0 0.01 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Life
3 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Maxi Saver
0 1000 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Smart Saver Account ( < $250k)
0 1000 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Savings Maximiser (<$100k)
3 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Maxi Saver
3 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Online Savings Account
0 300 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Bonus Savings Account
4 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details iSaver
4 0 0 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Bonus Saver ($0+)
0 200 0 $product[$field["value"]] $product[$field["value"]] $product[$field["value"]] More details Bonus Saver (<$1 Million)
Savings.com.au’s two cents
When choosing a savings account, looking for a high base rate is definitely important but it’s not the only thing to look out for. You also want to make sure the savings account doesn’t have any monthly account keeping fees as these will eat into your savings. There are so many savings accounts on the market that don’t have any account keeping fees, so it wouldn’t make sense to choose an account that does.
You should also consider what features you want in a savings account, such as the ability to link multiple sub savings accounts for different savings goals.
Photo by Vanessa Lee on Unsplash
Emma Duffy
Rachel Horan
