Billions of dollars in Australian bank accounts do not grow with interest rate rises because many savers miss bonus conditions or hold products that pay no interest, an ABC report found. The figures show that a higher advertised rate does not guarantee a higher return for every customer.
Data compiled for the ABC by comparison site Canstar showed that Commonwealth Bank, NAB, ANZ and Westpac each raised their maximum savings rates by 0.20 or 0.25 per cent after the last Reserve Bank of Australia increase. Canstar said the increases applied to only selected products, often with conditions attached. Customers who miss those requirements fall back to base rates that the banks have kept at 0.10 per cent.
Why savings do not grow for some customers
Some accounts require regular deposits or limit withdrawals before customers qualify for a bonus rate. Under these rules, a balance may not grow at the advertised rate when a customer misses a condition. A missed minimum deposit or a failure to meet withdrawal rules can leave a customer earning virtually zero interest, according to the report. The Australian Competition and Consumer Commission found in a 2023 retail deposits inquiry that more than 70 per cent of customers never met monthly conditions.
Large balances also sit in accounts that earn no interest, so those savings do not grow through interest payments. As of June, Commonwealth Bank held nearly $122 billion of customer money in such accounts, its annual report showed. Westpac held nearly $82 billion as of March, while NAB held about $67 billion and ANZ about $61 billion in the same period.
Bank alerts and account checks
Canstar’s Sally Tindall said customers can miss out when they do not meet account terms. She said banks could send a proactive email or text near the end of the month to warn customers who are unlikely to qualify for a bonus rate.
The Australian Banking Association’s chief executive, Simon Birmingham, told the ABC that banks support customers through app alerts and messages. He said the market offers hundreds of term deposit and savings account options, and that product differences give customers flexibility. Birmingham also said banks paid depositors more than $120 billion in interest across the past financial year.
The ACCC inquiry found that only 16 per cent of consumers had switched savings accounts in the past three years. That finding highlights how account choices may persist even when savings do not grow as customers expect. Only 11 per cent had switched transaction accounts. Western Sydney University associate professor Michelle Cull advised consumers to conduct regular checks and read account terms carefully because each person’s circumstances differ.
Other options depend on personal circumstances
Cull said some borrowers could consider an offset account, which she said may save the interest rate charged on a mortgage and avoid tax on savings interest. She stressed that consumers should examine the details of their own situation. The report also noted that introductory rates last for a limited time.
Those evaluating savings options can also read about banks’ deposit initiatives and recent central bank rate decisions. A separate report on rate changes and savings returns offers related coverage.
The RBA was due to meet again the following week to decide whether to raise rates for a fifth time that year. Deputy governor Andrew Hauser had said earlier that month the inflation outlook was “materially worse” than forecast, while markets put the chance of a November rise at 98 per cent. Tindall said customers unhappy with their account could compare the options available, including products offered by their current bank.
