High Bonus Rates Savings Accounts

What is a bonus interest rate?

The bonus rate is an interest rate that savings accounts offer on top of their base rate. Banks structure these accounts in such a manner that the bonus rate is either offered as an introductory rate or as a conditional rate meaning certain conditions must be met each month before you can qualify.

Such conditions vary across banks, however these range from:

• Depositing a certain amount into your savings account every month.

• Making no or limited withdrawals every month.

• Making a certain number of transactions every month using a linked transaction account.

• Having a linked transaction account with a certain amount of money deposited into it every month.

• Keeping your savings account balance above or below a set threshold.

It’s not unusual for some savings accounts to require you to meet a combination of these requirements every month in order to earn the bonus interest rate. For example ING’s ever-popular Savings Maximiser requires you to deposit a certain amount each month into a linked transaction account, alongside making a minimum of five card transactions and growing your account balance from the month prior.

Savings accounts with bonus interest rates can be attractive for those saving towards a goal, yet want to be rewarded for their consistent savings habits. These accounts are more likely to offer higher total interest rates (base rate + bonus rate) than savings accounts that don’t offer a bonus rate.

Before you choose a savings account, find out whether the account is eligible to receive a bonus interest rate, and what conditions must be met each month in order to earn the maximum bonus rate. Some bonus rates are only available for a limited period of time - aka an introductory rate or a honeymoon rate - so while the bonus rate might make the savings account look really tempting, the base rate could leave much to be desired.

How do base and introductory rates differ from bonus rates?

The base rate is the default interest rate that account holders will earn without needing to meet any requirements.

The introductory or honeymoon interest rate is a temporary bonus interest rate that is usually only offered in the first few months of opening the account. Introductory interest rates are often quite high to entice new customers to open up an account - but the rate it reverts to, the base rate, can be quite low so it’s worth checking before signing up.

Banks such as Macquarie and Rabobank currently offer 4-month introductory rates as a temporary bonus interest rate. After the completion of the 4-month period, the rate reverts back to the base rate.

Features to consider when looking for a bonus rate savings account

Interest rate

The purpose of a bonus interest savings account is to boost the balance of your savings by letting the power of compound interest work its magic. Each bank will offer different bonus interest rates with different conditions, so be sure you factor in whether you are able to first meet these conditions before opening an account.

Monthly fees

Savings accounts are generally fee-free products, however some banks may charge you annual fees and withdrawal fees. To benefit your savings most, it’s important to first check whether the bank charges fees before opening an account.

Usability

If you are required to make monthly deposits to meet bonus interest rate conditions, it is important that you can easily access and transfer funds into your account. You may wish to set up regular transfers to make sure you meet the bonus rate criteria. Having an account that offers digital banking through a mobile app, as well as account access through online and phone channels allows you maintain control over your savings.

Savings.com.au’s two cents

A savings account with a high bonus rate can offer a great way to take advantage of the powers of compound interest if you are trying to achieve a specific savings goal. Before you sign up for a savings account with a high bonus rate, it’s important to determine whether the rate on offer is simply an introductory rate or a conditional rate, as well as the requirements to earn that bonus rate each month.

When it comes to choosing a savings account, a high interest rate isn’t the only thing to look out for. As outlined above, you should take into account any fees that could potentially arise as well as the usability of the savings account. Consider what features are necessary in order to achieve specific savings goals and whether or not the account is designed to help get you there. At the end of the day they are your savings, so its important you choose the option that will benefit your finances most.