High interest savings accounts Australia

Which savings account has the highest interest rate?

Currently, the highest savings account rate you can get (other than kid's accounts) is 5.65% p.a. with the new HomeME savings account by ME Bank. This is a great rate, however there are a few strings attached that may make it difficult to earn this rate.

You need to deposit $2,000 each month, which is significantly higher than most other accounts with similar bonus rates on offer. Plus, this rate is only available on balances up to $100,000 (many other savings accounts pay bonus interest on balances up to $250,000). You also need to make sure your balance is higher at the end of the month than it was at the start.

These conditions could be easily manageable if you have your regular salary deposited into ME, and use the everyday account for your day-to-day spending.

If this account doesn't suit you, here are another 5 top savings rates for July 2023.

5 top high interest savings accounts

Other ways to earn interest on your money

Term deposits also allow you to earn interest on your cash. Some accounts offer similar rates to high interest savings accounts, with no monthly deposit conditions to meet. If you’re interested in locking your money away for a set period of time and earning a high, fixed interest rate in return, you can check out some leading term deposit rates below.

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Bankwest Online Term Deposit

Up to 5% p.a. for 9 months (interest paid at maturity)
$0 Account keeping fee
Interest paid on maturity
Up to $5,000,000 can be invested

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BCU Term Deposit

5% p.a. for 9 month terms
No setup or account keeping fees
Terms from one month to three years

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MyState Bank Online Term Deposit

Earn a fixed interest rate up to 5.1% p.a.
Minimum deposit of $5,000
Short to medium terms available

Big 4 banks high interest savings accounts

How do the Big Four banks compare at the moment? Here are the high interest savings account rates currently on offer with the Big Four banks.

How to compare high interest savings accounts

There's more to consider than just the high interest rate. Think about the following when you compare accounts:

• Is the interest rate competitive?
• Can I meet the monthly deposit requirement every month without putting myself into financial stress? If you can't, consider an account with a smaller monthly deposit condition.
• Is it important to me that I keep my existing everyday bank account? If yes, consider a savings account with that same bank.
• Is the high rate for an introductory period only (e.g. for the first 4-5 months)? If it is, will I be happy to change accounts again after this?
• Am I able to make withdrawals from the account if I need to without losing my interest that month?

What is a high interest savings account?

It's a savings account that pays a higher interest rate than a standard account. Because these accounts offer a higher interest rate, there are usually a few conditions to meet to earn it. For example, you might be required to deposit a minimum amount each month or limit your withdrawals from the account. A regular savings account, in comparison, will offer a lower interest rate on your balance each month, but there usually won't be account conditions to meet.

Is now a good time to open a high interest savings account?

Yes, now is a great time for people trying to save to open a high interest savings account. Over the last few years savings rates have been at all-time lows, driven by a historically-low cash rate. However the cash rate has been lifted 12 times since May 2022. With the latest May RBA announcement raising the cash rate, it now sits at 4.1%. Because of the higher cash rate, we've seen many savings accounts increase their rates as a result and they're still going up now.

At the start of 2022 there weren't many accounts offering much higher than 1.5% p.a., but now in 2023 there are several accounts paying above 5.00% p.a. or even as high as 5.50% p.a.

Standard variable rate vs maximum bonus rate

You'll notice a few different rates when you compare accounts, here's what they mean:

• Standard or base rate.This is the minimum rate you'll earn on the account when none of the conditions are met.
• Bonus rate.This is the extra rate you'll earn on top of the standard rate when you meet the account's bonus conditions (e.g.: monthly deposit).
• Maximum or total rate.This is the standard rate plus the bonus rate, and the total interest rate you'll earn when all account conditions are met (this is what you want to be high!).
• Introductory rate. Some accounts offer a special intro rate for a short period, usually 3-5 months, after opening the account. This rate will drop down to the standard rate after the intro period is over.

Pros and cons of a high interest savings account

Pros

• Higher interest rate. Compared to an everyday transaction account, which usually pays no interest, and a standard savings account, which won't pay much interest, a high interest savings account can help you grow your savings faster.
• No fees. Savings accounts don't charge any account-keeping fees, and there are no fees to add money into or move money out of the account.
• Your money is safe. Your savings are protected by the Australian government under the government guarantee scheme. Most banks and financial institutions are included in the scheme, which means eligible deposits are insured up to $250,000 per person, per institution.
• Access the money at any time. Your cash is easily available whenever you need it. Unlike a term deposit, which locks your funds away, you can move the money from your high interest savings account into your everyday bank account to spend it within seconds of needing it.
• Good incentive to save. You often need to deposit money regularly in order to earn the high interest rate, which is a great incentive to save money and grow your balance.

Cons

• Introductory offers are for limited times. Often the highest interest rates will be for introductory offers only, which means they're only available for the first 4-5 months.
• You need to meet monthly conditions. A high interest savings account isn't a set-and-forget investment - you need to meet monthly deposit and spend requirements plus often limit your withdrawals in order to earn the high rate.
• The linked transaction account might have fees. High interest savings accounts will often require you to also open a transaction account with the same bank, and this account might come with fees and charges.

Compare high interest savings accounts

What features do high interest savings accounts have?

Here's how you access your money, how interest is applied and the conditions you might need to meet.

Higher interest rates

High interest savings accounts offer a higher interest rate which is a combination of a bonus interest rate on top of the base interest rate each month that you meet the account conditions. This gives you the chance to earn extra interest each month.

Compound interest

Compound interest allows you to earn interest on your interest, helping your money grow quicker.

Let's say your balance was $10,000 and you earned $100 in interest during the month. The following month, interest would be calculated on your full balance of $10,100, so you'd earn even more interest the second month.

Linked to transaction account

You generally link a savings account to your everyday bank account, usually with the same bank. This allows you to easily move money back and forth from your savings account to your everyday bank account when needed. This is handy, as savings accounts don't come with a debit card to access your money (but bank accounts do).

Conditions to meet

In exchange for a high interest rate on your savings there are usually a few account conditions to meet. This varies from bank to bank, but most accounts require you to regularly deposit money and keep growing your balance (which is a good thing if you're trying to save!). Some wil also ask you make a set number of transactions from your linked bank account each month or to limit withdrawls from your savings.

Variable interest rates

Savings accounts all offer variable interest rates. Similar to a variable rate home loan, a variable savings rate means it can change at any time, if the bank decides to do so. The opposite of a variable rate is a fixed rate, which is offered on term deposits. A fixed rate doesn't change and is locked in for a set period of time.

No fees and charges

High interest savings accounts typically have no account-keeping fees and no regular charges. The account is designed to help you save money, not get eaten away by fees. However, in order to access the money, you'll need to link the account to an everyday spending or transaction account, which might have fees and charges.

Security and money guarantee

A savings account is one of the safest places to keep your cash. The money in an account with an Australian bank is protected by the Government's bank guarantee scheme. Under this scheme, your deposit up to $250,000 is guaranteed by the Government, even if something were to happen to the bank.

Plus, unlike investing in shares which could see you lose money if the share price falls, the money in your savings account can't fall or go down unless you decide to spend it.

High interest savings accounts vs standard savings accounts

High interest savings accounts offer better interest rates, but with more conditions attached. If you're looking for a set-and-forget option without having to meet any ongoing conditions, a standard savings account still offers some level of interest but without any effort on your end.

Let's take a look at some high interest savings accounts and regular savings accounts from the same bank, so you can see the difference.

How do I apply for a high interest savings account?

You can open an account online in a matter of minutes. It's free and easy to do and requires little effort or paperwork. Once you’ve clicked through to the bank's secure application page, you will typically need to provide the following:

• Your personal details such as full name and contact information
• Your tax file number
• Documents to verify your identity and age, like your driver's licence or passport

Once you've finished the application form and the bank has verified your identity, your account will be opened and you'll be able to start transferring money into it and earning interest.

Compare high interest savings accounts

FAQs about high interest savings accounts

• Should I bundle accounts to get a higher rate?

  Most high interest accounts will require you to also open a bank account with the same bank, to link to your savings account, in order to earn the top rate. You aren't required to do this, but it makes sense to do so if you want to earn the higher interest rate.

• Should I invest my money in a high interest savings account or term deposit

  It depends on how much access you'll need to your money. With a savings account you're able to access the money at short notice whenever you need it. With a term deposit, your money is locked away for the duration of the term length that you select so you can't access it for unexpected expenses.

• Are the introductory savings rates worth it?

  If you find an account with an introductory rate that's higher than the other accounts in the market, it could be worth it. Because you'll only earn the higher intro rate for a few months, it'll usually be more beneficial for larger balances.

• How does inflation affect my savings account?

  Inflation means your money is worth less than it was before, as the cost to buy everyday items goes up. Making sure your money is earning interest is one way to keep up with inflation, but the savings rates are still not as high as current inflation rates. That said, it's much better than keeping your cash sitting in a regular bank account.

• Should I declare the interest I earn when lodging my tax return?

  Yes, you need to declare the interest you earn on your savings when you lodge your tax return. It's treated as income and taxed at the same rate.

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