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Outstanding Value Savings Accounts
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Helpful Information

What is a savings account?

A savings account is – as the name suggests – a bank account into which you deposit money to accrue interest and build your savings.

Savings accounts are popular and useful for just about anyone who’s trying to save towards a goal. Some investors, such as those with a self-managed super fund, use a savings account as part of their investment portfolio to guarantee receiving some kind of return on their money.

According to Statistics New Zealand, Kiwi households had been saving more than they spend from 2010 to 2015, saving around 2% of their disposable income per year – an impressive record. But as of November 2015, we were back to spending more than we save.

The 2015 OECD survey showed that New Zealand’s economy is growing faster than most other OECD countries, and we remain one of the richest countries in the world. The Reserve Bank of New Zealand says we collectively hold deposits of around $155.9 billion as of June 2016.

When we have realistic goals for our savings and we know what to look for when choosing a savings account, we can do quite well for ourselves. Apart from reading Canstar’s guides, we also recommend you look up the savings planner and budget planner tools from Sorted.org.nz.

If you’re struggling to save and would prefer advice on how to budget to meet your regular financial needs, head on over to our Budgeting & Saving guide. You’ll find all our best hints and tips to help you survive and thrive financially.

Common features and fees of savings accounts:

There are a few basic things to look for in a savings account, depending on your financial needs:

  1. High interest rate (beware of high introductory rates that revert to lower rates)
  2. Low fees
  3. Suitable minimum or maximum deposit amounts
  4. Free transactions
  5. Accessibility of branches and ATMs if necessary

Some common fees to look out for on various savings accounts are:

  • Monthly account-keeping fees
  • Branch deposit fees
  • Over-the-counter transaction fees
  • Eftpos fees
  • Electronic transaction fees
  • ATM withdrawal fees, both own ATM network fees and other network ATM fees

The good news is that most savings accounts won’t charge fees for electronic transfers, and you can usually waive the monthly account-keeping fee simply by depositing a certain amount each month.

What are the current interest rates for savings accounts?

The Reserve Bank of New Zealand lowered our official cash rate again in August 2015 and it now sits at 2.00%, and this has translated in a small way to the rates on offer for savings accounts. You can compare interest rates for regular and bonus savings accounts and online savings accounts on our website.

When it comes to our star ratings of savings and transaction accounts and award for savings accounts in New Zealand, CANSTAR assesses the savings and deposit offerings for two different customer profiles:

1. Flexible Saver / Online Saver:

Flexible Savers do most of their banking online, but they like to keep their branch options open. They need an account with a reasonable interest rate, easy access to their money, and no conditions restricting how much interest they can earn on their savings. A flexible account suits them more than locking away their money in a term deposit.

2. Regular Saver / Bonus Saver:

Regular Savers deposit a certain amount of money per month towards general savings or a specific goal. They can generally earn a good base rate plus bonus interest for making regular deposits. They need a great interest rate, without needing to access their money all the time.

Pros and cons of choosing a notice saver account:

CANSTAR has seen a shift recently towards notice saver accounts rather than term deposits. Customers want to be able to use some of their money and continue to save the rest at the same time.

Pros:

  • The interest rate changes, so you benefit when the interest rate goes up, unlike the fixed rates of term deposits.
  • You can add more money to the account whenever you want in dribs and drabs, rather than collecting a lump sum to put in a term deposit.
  • You don’t have to fill in paperwork or renew your investment decisions at the end of any particular term, unlike with a term deposit.
  • Your money is out of reach, so you can’t spend it – as with a term deposit – but you can make it available when you need it.

Cons:

  • The interest rate changes, so there’s no certainty about how much your investment will grow.
  • You need to keep checking that the interest rate is still competitive.
  • Easy access to your money can mean that you accidentally spend it instead of saving it and earning interest on it.
  • If you leave your money in there for enough years, it can work out that you would’ve gotten a better interest rate on a long-term term deposit.

Whichever type of account you choose, you need a consistently competitive rate to grow your savings. Many customers diversify their investment portfolio by investing part of their money in a savings account and part in a term deposit. You can compare savings accounts and term deposits on the CANSTAR website.

 

Written by: TJ Ryan

Please note that these are a general explanation of the meaning of terms used in relation to savings accounts. Your bank or financial institution may use different terms, and you should read your product disclosure statement (PDS) carefully to understand everything that may apply to your account. You cannot rely on these terms in relation to any savings account you may open.

Account-keeping fees: An ongoing fee charged to cover or partially cover the bank’s internal costs of creating and maintaining the account.

Annual equivalent rate (AER): A rate that can be compared between lenders, which shows what the interest rate would be if interest was paid and compounded once each year. Any advertisement for a savings product that quotes an interest rate must also quote the AER so that you can compare what return you could expect over time.

At call: At call transaction or savings accounts allow you to immediately withdraw your money from the account whenever you like. This is different to other types of savings accounts, where you have to leave your money in the account for a certain amount of time if you want to earn interest.

ATM (Automatic Teller Machine): A machine found in public places or at bank branches, which allows you to withdraw cash from your account. ATMs are usually on 24/7 so that you can use them any time you need cash. Although you don’t often need cash in New Zealand these days!

Balance: The amount of money currently in your account.

Banking Ombudsman: If you have a dispute with your bank and haven’t been able to resolve it through the bank’s internal complaints resolution process, you can contact the Banking Ombudsman of New Zealand. It is a free and independent service that helps people resolve disputes with their financial institution.

Basis points: A unit of measurement used in financial situations to describe the percentage change in interest rates or the value of a financial product. One basis point is 0.01% or 0.0001 in decimal form.

Bonus savings account: Accounts that give bonus interest whenever the accountholder meets certain conditions, such as making no withdrawals and depositing a certain amount of money into the account.

Branch: The physical building where your bank or financial institution does its business. Branches are only open during normal working hours.

Cash management account: A savings account for high balances (usually $10,000 – $20,000) with a higher interest rate and the flexibility of a transaction account.

Cheque account or checking account: A transaction account that allows you to make purchases with your own money by writing a cheque. If you do not have enough money in your account when the other person cashes your cheque into their own account, the cheque will “bounce”, meaning it is not paid and you may be charged a penalty fee.

Compound interest: Interest calculated on the total funds in the bank account, including interest earned, as opposed to only paying interest on the principal amount. Almost all savings accounts use compound interest.

Consumer: Someone who buys and uses products or services.

Credit card: A card that gives the account holder access to a line of credit. You can spend up to a specified credit limit, but the money must be repaid, otherwise you start paying interest on the balance of the card (whatever you have spent).

Debit card: A card that is linked to a transaction account and allows the cardholder to make transactions with merchants and withdrawals from ATMs. Also known as a bank card or cheque card.

Deposit: Money that you put into an account with a financial institution.

Direct debit: When a transaction is automatically removed from an account and received into a different person’s account. For example, wages are automatically removed from an employer’s bank and deposited into an employee’s bank account.

EFTPOS (Electronic Funds Transfer at Point of Sale): A payment system where you use your debit card to make payment for goods or services, or to withdraw cash. EFTPOS machines are used to process these payments at shops.

Electronic banking: A broad term used to refer to the banking system where you use online banking, telephone banking, ATMs, or EFTPOS to access your account. You can use electronic banking to make withdrawals or other payments, deposits, or transfers.

GST (Goods and Services Tax): The New Zealand tax levy on payments for goods and services.

Income: Money you earn, including hourly wages, salary, interest on your bank account balance, and government benefits such as Student Allowance.

Inflation: The percentage by which the price of goods and services rises each year across the country.

Introductory rate: An introductory bonus offer where a variable interest rate applies to the account for a set time period. At the end of the bonus period, rates revert to the base rates.

Junior savings account: Savings accounts for children. A parent or guardian operates the account in the child’s name but the child also has access to their account.

Online savings account (OSA): A savings account that is primarily managed on the internet.

Promotional rate: An interest rate which is only offered during a specified promotional period. When the promotional period ends, the interest rate will generally revert to the base rate. Similar to an introductory rate.

Reserve Bank of New Zealand (RBNZ): The Reserve Bank is the central bank of New Zealand, and they are responsible for setting the official cash rate. They manage monetary policies such as the official cash rate to stabilise inflation and the economy; maintain a sound and efficient financial system; and supply our national banknotes and coins.

Savings account: Bank accounts that pay significant interest back to the account holder and are not used to make transactions. Savings accounts typically have higher interest rates than transaction accounts. They can be linked to transaction accounts to make savings available as funds for transactions as needed.

Term deposits: An account with a financial institution where money is deposited for a set term (period of time) and earns interest when that term ends. The interest rate is usually fixed for the term of the deposit and is generally higher than a transaction account, but not always higher than some other at-call high interest savings accounts. There are fees charged if the investor withdraws their money before the end of the term. Also known as a fixed deposit.

Transaction: The movement of money in or out of your account, including deposits, withdrawals, and transfers between bank accounts.

Transaction account: A deposit account that serves the purpose of providing frequent access to funds in your account for debit card transactions made through EFTPOS at merchants, branches, ATMs, and also for the use of cheques.

Transfer: When you give the bank instructions to move money from one account to another account, e.g. moving money from your savings account to your transaction account. This is different to a “payment” where you send money from your account to somebody else’s account.

Withdrawal: When instructions are carried out to pay money out of your account and it is paid, e.g. getting cash out of an ATM.

Yield: The rate of return earned on an investment.

Who offers savings accounts in New Zealand? These are the providers we research and rate:

  1. ANZ Bank: ANZ offers a range of savings accounts including an online savings account, bonus savings account, and cash management account. ANZ has a long history, founded in 1835 in Sydney as the Bank of Australasia. Nearly 1 in 2 New Zealanders has one or more banking products with an ANZ brand, and they are our country’s largest rural banker. Since 1990, ANZ staff have fundraised over $15 million for The Cancer Society.
  2. ASB Bank: ASB Bank offers a range of savings accounts including an online savings account, bonus savings account, and term deposits. ASB opened in 1847 with the oath to serve the community, to grow, and to help Kiwis grow. Now more than 1.3 million customers bank with ASB.
  3. BNZ: The Bank of New Zealand offers a range of savings accounts including an at call savings account, bonus savings account, and the TotalMoney family account. BNZ opened in 1861 and they were the first bank to become carbon neutral, as well as being one of New Zealand’s largest Fairtrade workplaces.
  4. Co-operative Bank: The Co-operative Bank offers a range of savings accounts including an online savings account, bonus savings account, and the Prize Draw Saver that holds competitions every month. The Co-operative Bank was founded in 1928 as the Public Service Investment Society, but they have shaken off the shackles of their past and now offer banking to all Kiwis.
  5. Heartland Bank: Heartland Bank offers at call savings accounts and notice saver accounts. Heartland Bank was founded back in 1875 and is proudly New Zealand owned and operated by a local team. They were created from three large building societies and officially converted into a bank in 2013.
  6. Kiwibank: Kiwibank offers a range of savings accounts including an online savings account, bonus savings account, at call savings account, and notice saver account. They also have a special savings account for non-profit organisations – if you’re helping others, they want to help you. Kiwibank was founded in 2002 in an effort to keep New Zealanders’ money in New Zealand, and they are 100% Kiwi-owned. They now have more than 800,000 customers and you can find them in NZ Post shops.
  7. NZCU Baywide (New Zealand Credit Union): NZCU Baywide offers a range of savings accounts including an online saving account, bonus savings account, retirement savings account, junior saver account, Christmas Saver account, and personalised Goal Saver accounts for a specific goal. Credit unions began to spring up in the Catholic parishes of New Zealand in the 1950s, and by the 1980s New Zealand had over 300 hundred credit unions. Today there are 36, and 25 of those belong to the New Zealand Association of Credit Unions.
  8. RaboDirect: RaboDirect is a specialist savings bank, and they offer the RaboSaver savings account with no account-keeping fees, a bonus savings account, and a notice saver account. The RaboBank Group cooperative was founded in 1898 in the Netherlands, and RaboDirect opened for business in New Zealand in 1994 and has 33 branches across the islands. RaboDirect specialises in savings and investments, and 100% of their deposits are invested in the New Zealand food and agribusiness sector.
  9. SBS Bank: SBS Bank offers an online savings account and a goal-based bonus savings account. SBS Bank was founded in 1869 as the Southland Building, Land and Investment Society. They have remained independent and 100% customer-owned ever since, with members voting against being bought out by the big banks. If you need a hand getting set up with online banking, their video tutorial demos are here to help.
  10. TSB Bank: TSB Bank offers an online savings account and a bonus savings account. TSB Bank won the Canstar Blue NZ award for Most Satisfied Customers for Banking in 2015. TSB Bank began in 1850 as the New Plymouth Savings Bank.
  11. Westpac NZ: Westpac offers a range of savings accounts including online savings accounts, notice saver PIE accounts, online bonus savings accounts, a competition-based Save & Win account, the HomeSaver bonus savings account, and a junior and youth savings account. Westpac was established in 1817 as the Bank of New South Wales and they established Westpac New Zealand in 1861 when they bought the New Zealand branch of the Oriental Bank.

For more information on how CANSTAR rates savings accounts, read our latest star ratings report and/or Savings Award report.