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What to look for in a bonus interest account

If you’re a goal saver then your choice of savings account and the bonus interest you can earn really makes a difference.

What to look for in a bonus interest savings account to give your savings a boost

If you’re a goal saver – that is, you’re the type of saver that has  something definite in mind that you’re saving towards – then the type of savings account you choose and the interest rate it offers can really make a difference. That’s why bonus interest accounts are a popular choice for serious savers. 

But not all bonus interest savings accounts are created equal. The common feature all bonus interest savings accounts have is they reward goal savers with an additional interest rate on top of a base rate, provided they meet certain conditions within a month. These conditions can vary significantly though depending on the account, with some making it tougher to earn bonus interest than others. Add to this the fact that some accounts offer a base rate of as little as 0.01% p.a. if you don’t meet the bonus interest conditions, then the account you choose can really make a difference.

Fortunately, there are accounts that won’t make you jump through hoops in order to give your savings a bonus interest boost. Here are some questions to ask and key things to look out for.

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. 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 month, not that you’ve grown it by a mandatory amount. 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, however 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 savingsaccount is to grow your savings, especially when you’re a goal saver and have something specific in mind, or a target amount you want to reach. But the reality is sometimes you may need to dip into your savings, even if you intend to put the money back in a couple of days.

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 may withdrawals as you like – 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 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 practically nothing on your savings no matter what your balance is – some base interest rates are even as low as 0.01% p.a.

It’s important then to look for an account that pays a competitive 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 highlight an impressive bonus interest rate, but when you get into the detail you find you need to have a whopping great balance in order to earn it – even as high in some cases as $250,000. Fortunately, other bonus interest accounts will pay the same interest rate on every dollar you have saved in your account.

Can you track savings goals?

Aside from bonus interest, some savings accounts also come with other handy features that can help goal savers keep on track with their savings goals with a goal tracker function – some 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 distinct savings goals (you can set up as much as six for each account), set a date when you want to achieve the goal by and set up a regular transfer to get your savings growing. By setting up Savings Goals you can help establish good savings habits and easily track how you’re progressing.

Things you should know

This information does not take your personal circumstances into consideration, read the terms and conditions available above and decide whether the products and services are appropriate for you.