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Sinking savings account interest rates have resulted in a majority of Australians not knowing the financial return they’re getting from their cash in the bank.
New research by Canstar has found average interest rate cuts on savings accounts this year have totalled 0.65 per cent, and 55 per cent of savers don’t know what they’re getting paid.
Australians, on average, have $21,500 in savings – with over-50s holding around $25,000 and under 30s having about $11,600, the research found.
Canstar spokeswoman Effie Zahos said it was not surprising that savers didn’t know their interest rate considering the rapid changes since the Reserve Bank started cutting rates to record lows in June.
“They’re not feeling great about their savings and are thinking what’s the point of knowing whether I earn 1 or 0.1 per cent,” she said.
However, shopping around can pay off, with short-term deals shifting regularly between providers.
For example, Macquarie Bank is paying a honeymoon rate of 2.65 per cent for four months but it then drops to 0.35 per cent.
Bonus savings accounts offer some of the highest returns, with the difference between getting the best rate instead of the worst rate now $453 a year for an average deposit.
But these accounts usually come with conditions such as making regular deposits or no withdrawals.
“What will surprise you is just how good some rates are out there,” Ms Zahos said.
“It’s a case of not being lazy and chasing those deals – put a reminder in your diary or phone.
“Loyalty doesn’t pay with cash accounts. Some of the best deals are coming from institutions you may not have heard of before.”
People’s Choice Credit Union spokesman Stuart Symons said savers should “bite the bullet” and review their accounts every six months.
“Spending 30 minutes going through all of your accounts can give you a better understanding of what you can achieve and whether your current set-up will help you get there,” he said.
Mr Symons said people should aim to save smaller amounts more often.
“Compound interest is every saver’s friend and will build bigger returns over time,” he said.
Automating transfers from other accounts into your savings account would build good habits and save time, Mr Symons said.
“Bonus savings accounts reward disciplined savers. If you need to dip in and dip out, you risk losing your bonus, which will often give you negligible returns.”
Originally published as How much does your bank pay you?