Bonus savers are great for motivation. Providing you keep to the plan you’ll earn more in interest than you would from a similar savings account. For example, Westpac offers 3% for a standard online saver account, but 3.5% for the equivalent online bonus saver account. Many people these days use online bank accounts for convenience so the opportunity to earn bigger savings interest this way is a powerful drawcard.
Here are a few things to look out for when considering bonus or incentive savings accounts:
Watch the fine print
As with most things the devil is in the detail with bonus saver accounts. Some such as the PSIS with its Step Saver account allow one withdrawal a month before you lose the bonus. Others such as the ANZ’s Serious Saver account allow one free withdrawal but then charge a fee for any subsequent withdrawals that month. It’s also worth checking how often interest is added to your account. If it’s monthly, not quarterly, your savings will grow at a faster rate thanks to compounding of the interest.
Not for everyone
If you’re not disciplined or likely to need to make a withdrawal, then skip bonus saver accounts. The base interest rate on these accounts can be as low as 0.25%, which is a pittance. Don’t assume, as well, that a bonus saver account automatically pays the best interest rate. You may be better off changing your savings account to another financial institution.
For those savers that like a bit of a thrill and are just starting out and have a very low balance, prize savers may be worth a look. 3% interest on $200 will not get your savings very far, where as a win fall of $10,000 can kick start your savings. Again be sure to check the fine print and be prepared to leave for a higher interest account when your balance grows.
Get the best deal
Like all accounts bonus and prize accounts require some cunning by customers to get the best deal. Banks offer attractive rates and prizes whilst marketing new accounts, then over time the interest rate can quietly erode. As a result it’s worth making a note in your diary to shop around for a better deal once a year.