Tips on choosing a bonus interest savings account

What we’ll cover

• Minimum monthly deposits
• Consequences of withdrawals
• Base interest rates
• Tiered bonus interest rates
• Tracking savings goals
• Monthly and other fees

What to look for in a bonus interest saver account

If you’re a goal saver – that is, you’re a saver with something definite in mind that you’re saving towards – you'll most likely want a savings account to help you reach your goals faster. And that may mean considering an account that earns great interest.

But not all bonus savings accounts are created equal. 

The common feature most bonus interest savings accounts have is that they reward savers with an additional interest rate on top of a base interest rate, provided they meet certain conditions each month. But the bonus rate criteria may vary significantly from account to account, with some making it tougher to earn bonus interest than others.
 

Add to this the fact that some accounts offer a very low base rate each month should you fail to meet the bonus interest conditions. Plus, some bonus rates may only be introductory rates. Or they may require a minimum balance or regular deposits.

Fortunately, there are some bonus interest savings accounts that won’t make you jump through hoops in order to give your savings a bonus boost. Here are six questions to ask when you compare savings accounts.

How much will I have to deposit each month to earn bonus interest?

Most bonus interest accounts will require you to make at least one deposit a month in order to earn bonus interest, and that can be fairly simple if you're paid monthly into a linked transaction account. But some accounts make it harder by setting a minimum deposit amount – some as high as $200 per month.

Others, however, give greater freedom, requiring just that you grow your balance by the end of the calendar month by any amount compared with the end of the previous month. This is particularly important if you want to start your regular savings small but still want to be rewarded for your effort with bonus interest.

A Westpac Life account for example, will pay bonus interest each month you make a deposit to grow your balance, though there’s no requirement for how much you need to grow it by.
 

Are there any conditions for making withdrawals?

True, the aim of a bonus interest savings account is to grow your savings, especially when you have something specific in mind, or a target amount you want to reach. But in reality, you may need to dip into your savings, even if you intend to replace the money later in the month.

Does this mean you need to miss out on earning bonus interest? That depends on the account you choose.

Some accounts not only require you to make a minimum monthly deposit to earn bonus interest, they also won’t let you make any withdrawals. 

Fortunately, other accounts give you a break. With a Westpac Life account, provided you’ve grown your balance by the end of the month, you can make as many withdrawals as you like. That's ideal if you need to dip into your savings in the short term but will be able to top them back up within the month.

Does the account offer a competitive base interest rate?

What happens if you haven’t met the bonus interest rate requirements by the end of the month? Unfortunately, with some accounts that means you’ll earn very little on your savings no matter what your balance is.

It’s important then to look for an account that pays a good base rate as well as bonus interest, such as Westpac Life. That way you’ll still be earning interest on your savings whether you’ve made a deposit that month or not. 

Is the bonus interest rate tiered?

Some accounts may showcase an impressive bonus interest rate, but when you get into the detail you find you need to have a whopping great savings balance in order to earn it – even as high in some cases as $250,000. Or they have variable rates according to the balance held.

Fortunately, other bonus interest accounts – such as Westpac Life – will pay the same interest rate on every dollar you have in your account.

Can you track savings goals?

Aside from bonus interest, some savings accounts also come with handy features that could help you keep on track with your savings goals. A goal tracker function can even let you save for different savings goals within the one account, so there’s no need to have multiple savings accounts if you’re saving for more than one thing at a time.

Westpac Life comes with the Savings Goals feature. This allows you to set up to six savings goals, set a date when you want to achieve each goal by, and set up regular transfers to get your savings growing. And you can manage it all in the Westpac App or Online Banking.

By setting up Savings Goals you could establish good savings habits and easily track how you’re progressing.
 

Are there any fees for opening and maintaining the bonus interest account?

Few bonus interest savings accounts charge fees such as monthly account keeping fees, transaction fees for moving money from an external bank, or fees for when you transfer funds from a linked everyday account with the same bank. However, it's still worth checking the small print before you apply for an account to help avoid any surprises.

In summary

When comparing savings accounts that pay bonus interest, there are a number of factors to consider, including what it takes to earn interest at the rate offered. Many savings accounts with bonus rates give you extra interest, however it's important to check the account conditions and bonus criteria before making a decision.