Commonwealth Bank has cut its savings rates for the sixth time in just 10 months and is now paying “peanuts” to customers, one analyst warned.
Australia’s largest bank reduced the savings rate on its NetBank Saver account by 0.07 percentage points on Tuesday, leaving its introduction rate at just 0.33 per cent for the first five months before reducing to 0.05 per cent after then.
The introductory rate was at 0.75 per cent last November when the Reserve Bank lowered official interest rates to 0.1 per cent.
But a series of cuts since then has left the bank paying almost nothing to customers, despite deposits soaring by $31 billion in the 2020-21 year.
“CBA has been quietly chopping away at its savings rates,” RateCity research director Sally Tindall said in a statement on Tuesday.
“While the cuts have all been relatively small, they’re starting to add up.”
The best savings rates
Australians have been stuffing money in the bank during the pandemic amid ongoing uncertainty, but deposit returns have plummeted.
It means workers are putting more money in the bank but earning less interest for their efforts.
And Commonwealth Bank isn’t alone. Westpac, ANZ and NAB have also cut their savings rates over the past 10 months.
All of the big four are now offering ongoing savings rates of just 0.05 per cent.
The good news is that better deals are available elsewhere, Ms Tindall said.
“[Commonwealth Bank] might be paying peanuts to savings customers but other banks are still offering rates four times higher,” she said.
There are nine banks offering ongoing savings rates of more than 1 per cent, RateCity analysis has found.
The best deal in the market is still ING Bank’s 1.35 per cent deposit rate.
But younger customers can get an even better deal if they shop around.
Westpac is offering a market-leading 3 per cent savings rate to those aged between 18 and 29, with a savings cap of $30,000.
Meanwhile, Bank of Queensland is offering 2.5 per cent for 14-to-24-year-olds on up to $10,000 in savings, which is the best deal for teenagers aged 14 to 18.
The best ways to boost your savings
Centaur Financial Services managing director Hugh Robertson said consumers looking to maximise their savings rate should make the most of introductory rates and continue switching once they expire.
Though he warned that would require ongoing effort and diligence.
Some banks also offer higher rates to customers who deposit at least $200 in their accounts over a given time frame, so it’s always worth checking the terms and conditions.
“You can play the game and work out the ones you can get bonus interest from with regular contributions,” Mr Robertson told TND.
“You can also keep shopping around to get five months [of] bonus interest.”
Workers struggling to boost their savings accounts might be best off with a set-and-forget approach though, Mr Robertson explained.
He said savers should set up a separate savings account as a starting point and then ensure automatic transfers are made into it each month.
“You have to create a habit first, so start small and avoid any manual processes,” Mr Robertson said.
“Do a transfer that you won’t miss to start with to give yourself more confidence.”
If you’re going to set up regular deductions to set and forget it makes sense to find a strong ongoing savings rate that doesn’t revert to lower returns after a fixed period of time.
Three bonus savings tips
- Consider turning saving into a game with these handy apps
- Draw up a solid budget while you’re stuck in lockdown
- Set clear goals and ‘pay yourself’ before you have the chance to spend your disposable income.