High Yield Online Savings Account

With interest rates in Australia in a rising phase, perhaps you’re thinking of putting some spare funds into a savings account paying good interest.

Features of a High Yield Online Savings Account

Banks compete for your custom and design banking products to suit the spending and saving patterns of people with particular needs.   In this article we’ll be looking at the features that differentiate high interest online savings account from two other more traditional accounts: transaction accounts and term deposit accounts.

• Bank savings accounts are designed for people with a savings goal. They are positioned between transaction accounts, which are intended to have a number of day-to-day banking transactions but don’t reward you for having surplus funds in the account, and term deposit accounts where there is a healthy account balance but no transactions between opening and closing the account.  Transaction accounts allow ATM withdrawals, eftpos payments, cheques and online fund transfers; high interest savings accounts don’t usually offer these facilities because they are designed for people who want to place their spare funds out of reach. 
• High yield accounts pay interest, usually at variable rates so that account holders can benefit from rises in interest rates.  Transaction accounts don’t usually pay interest (except for deeming accounts for people aged over 55 and Centrelink pensioners). Term deposit accounts pay higher interest than savings accounts but usually the interest rate is fixed at the start of the term with the result that customers gain if interest rates fall but lose out if interest rates rise.
• Online accounts allow customers to transact online for free. Maintaining and staffing high street banks is expensive compared with the cost of computerised systems.  Banks pay interest on online savings accounts, and offer fee-free transactions, to encourage customers to bank electronically, and save on the banks’ overheads. As some online accounts don’t provide for the sorts of transactions that can’t be carried out electronically, you may also need a linked transaction account which offers these facilities

Who Is Suited to a High Yield Online Savings Account?

If you’re thinking about opening a high yield online savings account, it’s important to consider your bank transaction pattern to make sure that this is the type of account that suits your saving and spending needs. It’s helpful to study a few recent bank statements and estimate how many ATM withdrawal and electronic transfers are made each month, and the number of cheque payments you make. 

You should also consider whether you currently have some savings, the amount you are hoping to accumulate in a savings account, and your timescale for achieving this savings goal.   A high yield online savings account might suit you if:

• You are saving for a particular purpose and have a definite time scale.  If you already have some savings, and can afford to lock some funds away for a while, your money will probably earn you higher interest in a term deposit account; these accounts usually require you to have a minimum opening balance of at least $1,000 for a term between one month and five years. One advantage of term deposit accounts is that your money is secured up so you can’t be tempted to fritter it away thoughtlessly; however you need to be able to access some funds in case of an unforeseen emergency. Most banks require a high yield online savings account to be linked to a transaction account, either with the same bank or a different institution; this is a good arrangement if you want to keep a transaction account for day-to-day banking, with any surplus transferred into your savings account to earn interest. 
• You want to earn interest on your savings. If you are keen to have your savings work hard for you, you’ll be attracted to a high interest savings account that calculates interest daily.  There are often special introductory offers of high interest rates for a given period before interest reverts to the standard rate; it might be worth opening an account with a short term high interest offer if it brings higher interest earnings over your total savings period.  
• You prefer to do your banking transactions online.  If you want to avoid queuing in bank branches an online savings account might suit you, provided that you also have a transaction account for day-to-day banking. If you prefer face to face dealings with your bank or don’t have easy access to the internet, an online account is probably not your best savings option. 

To find out more about the high yield online savings accounts currently offered, view our comparison table here to follow our secure link to your chosen provider.

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