What is a high-interest savings account?
A high-interest savings account (HISA) is a type of savings account offered by banks with competitive introductory interest rates. A HISA is similar to a standard bank account, but is designed for saving instead of spending - these savings accounts will often also have bonus interest applied when certain savings conditions are met, and use compound interest calculated daily and paid monthly.
How does a high-interest online savings account work?
High-interest savings accounts are used to grow a deposit amount - they are guaranteed by the government, accrue interest at a higher rate than an everyday transaction account, while remaining completely liquid and available should you require the money, without penalty.
Interest applied to a savings account is compound interest calculated daily and paid monthly - to see how much you could grow a deposit using a HISA, you can use our Money.com.au Compound Interest Calculator.
You generally link a savings account to your bank account. All savings accounts come with a free, 24/7 online banking platform to access your funds, though in some cases, you can only link your savings account to another account within the same bank.
There are sometimes differences in accounts where you may need to deposit a minimum monthly amount and make no withdrawals to earn any interest.
How to apply for a high-interest savings account
Once you’ve compared high-interest savings accounts and settled on the one most suitable for you, you can apply online with your chosen savings account provider. You’ll want to ensure you read all terms and conditions before applying, and be certain to understand any fees associated with the account you are opening.
To begin the application process, you will typically need to provide some basic details, such as:
- Your personal details and contact details
- Your Tax File Number (TFN) and related information
- Details of the account you want to link to your new high interest savings account
Savings accounts will generally not have any associated fees - make sure won’t be paying a monthly fee unnecessarily.
12 Most Popular High-interest Savings Accounts
Ready to compare high-interest savings accounts and see which HISA is suitable for you? These are the 12 most popular savings accounts currently available in Australia, ranked by their maximum interest rate:
- RaboDirect High Interest Savings Account - 2.50%
- AMP Saver Account - 2.36%
- HSBC Serious Saver Account - 2.35%
- Citibank Online Saver - 2.30%
- Bank of Queensland Fast Track Saver Account - 2.15%
- UBank USaver - 2.10%
- ME Online Savings Account - 2.05%
- MyState Bank Bonus Saver - 2.00%
- ING DIRECT Savings Maximiser - 1.95%
- Suncorp Growth Saver Account - 1.95%
- St.George Maxi Saver 1.80%
- ANZ Online Saver - 1.60%
Compare Savings Account Interest Rates
|Savings Account||Maximum Interest Rate||Standard Rate|
|RaboDirect High Interest Savings Account||2.50%||1.05%|
|AMP Saver Account||2.36%||1.40%|
|HSBC Serious Saver Account||2.35%||0.45%|
|Citibank Online Saver||2.30%||0.85%|
|Bank of Queensland Fast Track Saver Account||2.15%||0.35%|
|ME Online Savings Account||2.05%||0.35%|
|MyState Bank Bonus Saver||2.00%||0.30%|
|ING DIRECT Savings Maximiser||1.95%||0.25%|
|Suncorp Growth Saver Account||1.95%||0.20%|
|St.George Maxi Saver||1.80%||0.10%|
|ANZ Online Saver||1.60%||0.10%|
How to compare high-interest savings accounts
A high-interest savings account is a popular way to save money, though they aren’t always as simple as you might believe. To ensure you choose the best savings account for your money - i.e. which provides the best possible rate and chance to grow your savings - you should understand the pros and cons before depositing your money by comparing the following:
- Best Introductory Rates and Standard Rates
- Bonus Rate Conditions
- Existing or New Account Providers
- Deposit Conditions
- Most Secure Savings Accounts
Best Introductory Rates and Standard Rates
High-interest savings accounts will have an introductory or new customer rate; a higher interest rate offered for the first three to five months. These rates are used as an incentive to open the account and entice customers to join up with the provider. Introductory rates will be a key factor for comparing HISA offers if you are:
- Starting a savings plan
- Have a short-term savings goal
- Opening your first savings account
Remember that after the introductory period is over, compare your options again to ensure you're still getting a high rate.
There are generally not any conditions required to have these introductory rates applied - unlike bonus rates, which we’ll cover below.
Bonus Rate Conditions
Banks will also offer bonus interest if certain conditions are met. Many high-interest accounts now have tiered interest rates and bonus rates, and often require you to deposit a certain amount in your account before you are eligible to utilise them.
Be sure to check you are able to achieve these bonus rates through deposits before signing up. There’s little benefit in choosing a provider who offers a high rate which you won’t be able to access due to your own circumstances, though comfortably meeting them can provide an opportunity to truly maximise your savings growth.
Check if there are any conditions required to earn bonus interest. Bonus interest offers may only apply to new customers opening their first account or when certain deposit and withdrawal conditions are met.
Example Comparison of High Interest Savings Account Rates
|Savings Accounts||Introductory Rate||Standard Rate||Bonus Rate|
IMPORTANT: This is an example of rates and may not accurately represent current available offers
Existing or New Account Providers
Some high-interest savings accounts need to be linked to a transaction account. If you sign up with your existing banking provider, your savings accounts will be attached to your transaction account and can be managed online.
Separating your savings account means that it is harder to get the money back - you can let it grow slowly but steadily see progress.
Banks will indicate whether the HISA needs to be linked to a transaction account with your existing bank or can be attached to another bank - check to see if you can link it to your high-interest savings account before applying.
There may be certain limitations applied to high-interest savings accounts which are useful to look out for when comparing offers and finding the best HISA for your savings plan:
- Minimum Balance - This is generally either a minimum opening balance, or a minimum ongoing balance. You may be penalised if you fail to meet these conditions, and should be considered separate from the conditions required to receive bonus interest rates.
- Maximum Rate Limits - Most HISA offers will only apply to the introductory interest rate to a certain amount of money. For most HISA providers, the maximum introductory amount is $250,000.
Look for an account that has ongoing high-interest, a few months of introductory rates will do very little for your savings.
Most Secure Savings Accounts
When choosing a high-interest account, safety should be a key concern. Safety against getting hacked, safety against all of your money going under with the provider you choose. Look to go with a bank or credit union that offers a Government guarantee for deposits up to $1 million dollars.
Regularly compare your savings account options to ensure you're always getting the highest rate.
Savings Account Transfer Delays
When considering a new account (savings account, term deposit or other investment), it is important to consider how many days it will take to set up the account and to transfer your money.
If your money has to sit in a non-interest bearing transaction account for five days while you wait for paperwork to clear, then this can have a dramatic effect on the effective interest rate you are getting. Here’s an example:
- A 90-day term deposit has an interest rate of 4% p.a.
- However, there is a five-day delay on transferring your deposit
- The 5-day delay reduces the effective interest rate to 3.78%
As you can see, you may find a high-interest rate for your money, but unless you have the cash in that account for every day of the term deposit from day one, you will be getting a lower return than originally thought.
A lower effective rate on transfer may change your selection of account - i.e. you may prefer an account with a slightly lower nominal interest rate, but with a faster set-up process.
Opening multiple savings accounts
Whether you have one savings account or several is more of a personal choice, and it depends more on what you are saving for and how organised you are. You’ll need to ask yourself a number of questions, including:
- What are your goals?
- How will you track your savings?
- Will it organise your budget?
- Are you organised?
- Will you use the same bank for all your accounts?
Here are three reasons you might choose multiple savings accounts:
- You can track your progress of reaching your separate savings goals. You find this easier if all savings accounts are in the same place and can view them together through online banking.
- They can help you organise your budget because you can see exactly how much you need to put in each week/fortnight/month over the year.
- Separating your high-interest account also means that it is harder to access your money instantly - even just a few days to transfer - and you can also let it grow on autopilot to slowly but steadily see progress.
Keep your emergency fund separate so that you do not accidentally dip into the needed funds.
3 tips to get the most out of your HISA interest
1. Transaction versus Saving
Transaction accounts are a necessary part of everyday life. Look for low-fee accounts, and if the interest looks impressive, check to see what you need to do to earn it. This could include keeping a certain balance or maintaining a low level of withdrawal.
2. Deposits And Withdrawals
Banks set up savings accounts so they have a general idea of what money would be coming in. Thus, it has to be maintained at a certain balance, with a restriction on withdrawals and an obligation to contribute. Not fulfilling those obligations loses your interest for the period.
3. How to avoid fees on a high-interest savings account
Look for an account that suits your saving schedule and waives fees, and make sure you know the conditions of the accounts and any fees and charges you may get.
High-Interest Savings Account Summary
High-interest savings accounts are an effective way to save money and grow your deposit through compound interest. The key factors to comparing and choosing a HISA will be:
- The introductory and standard interest rates
- The length of the introductory period
- Any bonus rates or conditional penalties
- Whether you can link the savings account to your current banking account
- How the HISA will fit into your ongoing budget plan
Pros and Cons
High-Interest Saving Account FAQ
How do high interest savings accounts work?
A HISA is similar to a standard bank account, and use compound interest calculated daily and paid monthly. High-interest savings accounts are guaranteed by the government, and accrue interest at high rates.
What banks have the best interest rates on savings accounts?
Most major financial institutions in Australia will offer similar high-interest introductory deals for people wishing to deposit money and earn interest. Eligibility for these accounts will vary - such as a minimum deposit amount - and you will need to consider the length of the introductory period to get the best deal.
How can I get more interest on my money?
If you want to earn interest on a cash deposit at your bank and won’t be tempted to withdraw the funds at any time, you can opt for a high-interest savings account. These accounts work differently from a standard savings account, and offer high rates of introductory interest and bonus interest if certain conditions are met.
What savings account has the best interest rate in Australia?
One of the top interest rates in Australia in 2019 is the RaboDirect High-Interest Savings Account with a maximum interest rate of 2.50%. There are many other types of savings accounts available, and you can use our HISA guide to compare offers from various banks.
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