[The Conversation]

See when Australia’s biggest banks stopped paying proper interest on your savings – and what you can do about it​

Whenever interest rates went up in the past, I used to get told it wasn’t all bad news. At least it was good for some people: savers – people with money in the bank.

I hear a lot less of that these days.

If you’ve got money in the bank, you’re now lucky to earn anything at all. One in seven of the deposit dollars held by the Commonwealth bank (Australia’s biggest for deposits) is in a “transaction account” on which it no longer pays interest.

Where interest is paid, it is so tiny compared to what it was that Treasurer Jim Chalmers this month directed the Australian Competition and Consumer Commission to conduct an inquiry, using its compulsory information-gathering powers.

The last time the commission conducted such an inquiry, into mortgage rates in 2018, it gained access to nearly 40,000 documents from the big four banks and more than 7,000 from the smaller banks.

Bad news for savers: when your rates began to fall​

What the commission is likely to find is that whereas transaction accounts stopped paying interest some time ago, so-called online accounts offering interest on large deposits were paying very reasonable interest – up until five years ago.

How do I know that’s the likely finding? Here’s what I found, when I graphed the Reserve Bank’s measure of the average online rate for a $10,000 deposit against the Reserve Bank’s cash rate, going back to 2010.

Rates to January 2023
Source: RBA Get the data Created with Datawrapper​

What the graph shows is that, until about five years ago, the online rate for big deposits moved in line with the cash rate and (as it happened) almost exactly matched it. When the cash rate was 3%, the online deposit rate was 3%, and so on.

But from 2018, the deposit rate fell away. Except for the time when both rates were close to zero during the early years of COVID, the rate paid on large deposits has stayed well below the cash rate ever since.

That’s what the official figures say. But Anna Bligh, chief executive of the Australian Banking Association, sees them differently.

“This time last year, the four major banks, nobody, no bank was offering more than 0.3% on their savings account,” she told the Australian Financial Review this month. “Right now, they’re all offering at least 4% or more. So that’s a massive increase.”

But the rates Bligh quotes aren’t the standard ones.

The Commonwealth Bank is indeed paying 4% on its so-called NetBank Saver account, but the 4% is an introductory rate for new customers only – before slipping back to 1.6% after five months.

The web comparison site Canstar finds the average big bank introductory rate on $10,000 is 3.66%, up from 0.24% before the Reserve Bank put up the cash rate by a total of 3.25 points.

But the average rate offered when the introductory bonus wears off has climbed by much less, from 0.05% to just 1.16%.

Complexity and suspected collusion makes switching hard​

And some of the high-looking rates have special conditions.

The Commonwealth’s GoalSaver account also offers 4%, but only if you put in more money in each month. If you can’t, or if you make a withdrawal, the rate plummets to 0.25%.

The Australian Competition and Consumer Commission’s inquiry is likely to find that the complex nature of the deals makes switching hard, just as does the complex nature of electricity and health insurance deals.

That’s what it found about the bank’s mortgage offerings in 2018.

It found the “opaque” nature of the offers inflated the costs of shopping around (including time and effort) and was one of the reasons why 70% of borrowers surveyed by one of the big banks said they signed up after getting just one quote.

It said the big four banks profited from the suppression of incentives to shop around and lacked strong incentives to make prices more transparent.

So why have the deposit rates offered by the big four banks dropped away?

When it came to mortgages, the ACCC suspected tacit collusion. Its 2018 report referred to a “synchronised” approach to rates seven times.

Why the banks won’t act – unless we make them​

In very recent years, the banks have had less reason to offer high rates. During the first 15 months of COVID, the Reserve Bank made available A$188 billion of funding to banks at the extraordinarily low rates of 0.25% and 0.1%.

This meant banks had less need to attract deposits, and in any event, they were overwhelmed with deposits. Elevated savings rates during COVID pushed an extra $300 billion through their doors, as worried and locked-down households sought out safe places to stash cash.

Both of these things are changing. The last of the Reserve Bank’s cheap three-year loans to banks expires mid-next year, and households are stashing less into banks than they used to.

It is possible deposit rates might be about to improve, all the more so because the banks will be under scrutiny until the ACCC inquiry reports at the end of the year.

When announcing the inquiry, the treasurer invoked fairness. Chalmers called on the banks to “pass on the interest rate rises to savers as quickly as you pass on the interest rate rises to mortgage holders”.

But fairness has little to do with it. The banks will pay depositors more only when they need to, or when they are pressured to. Until then, for many of us, deposits will earn next to nothing, regardless of where the Reserve Bank moves rates.

So if you’ve got a savings account, why not call up your bank, quote this article – and ask them what they’re going to do about it.

This article was first published on The Conversation, and was written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

 

[Bill MacL]

BANKS AREN"T BANKS ANYMORE THEY'RE JUST GREEDY BUSINESSES MAXIMISING THEIR PROFITS BY PAYING VERY LITTLE OR NO INTEREST, CHARGING RIDICULOUS FEES AND PROVIDING LESS SERVICES INSTEAD OF USING OUR MONEY TO WORK FOR THEM AND US, THEY'RE GETTING LAZY.

 

[Suzanne rose]

To be honest we only keep our money in the bank because of safety but then again how safe is it being kept in the bank

 

[Ian Crane-Luff]

Bligh, like all politicians, lie and misleads, which like Bligh continues into their afterlife, Bligh like her predecessors and successors has been a typical Labor leader who misled the electors and blindly ignored protests and was blatantly dishonest to the point of corruption.

 

[LizBa]

In the past few months there has been a decent increase in banks that are now supplying 4.2% interest rate. Dont know if I am allowed to mention their names here. Suffice to say they are not part of the big four.

 

[Dino]

Banks, especially the BIG 4 (you know who you are!!) are not the only savings options out there. I have a savings account with a Credit Union (probably can't say who they are but PEOPLES I know have made this Credit Union their first CHOICE) which pays great interest + bonus rater on savings.
4.50% per month as long as you add to the account every month and the addition can be as low as $5/month

 

[GloGal]

Apart from the plethora of expletives starting with the letter "F" I'm muttering at the moment in relation to the Big Four Vultures, I recommend you take a look at ING deposit interest rates currently paying 5%! Not an introductory offer either. We've had the Maximizer Account for years now and it started paying 3.6% years ago. There are a few rules but it's a great account to have!

1. Can only have one account per name, so if you want 2, put each in separate names.

2. $100,000 limit per account

3. To get the bonus amount and get the full rate (currently at 5%), you must:

a) Use your ING debit card at least 5x per month, making sure all these debit purchases complete before the end of each month. We use ours at the start of each month to ensure this. If it's a joint account, this means 5 debit purchases between both people, not 5 each if you also hold a joint account connected to your debit cards.

b) Have at least $1000 deposited into another ING account each month, like your salary or pension or whatever. We have an Orange Everyday normal transactional account (free of service charges) where our income is deposited. (There are 2 types of accounts excluded, so ensure you don't use one of these.)

c) Make sure the balance in your Maximizer Account is larger on the last day of the month than it was on the last day of the previous month...any amount will do...like even 5 cents more. This also makes you grow this account and thus your savings.

We have the ING phone app and access our accounts this way. When you check, the app will show you when you've reached all three prerequisites to ensure you get the 5% rate each month.

As an aside, dealing with ING has been a pleasure over the years. They are fair and having once had 2 mortgages through ING, they are much, much better to deal with than NAB, BankWest or ANZ, again based on personal experience. If you google customer reviews, you'll find customers rate their experiences with ING positively.

I had repeatedly emailed my MP over the years, demanding a Royal Commission into the Financial Services sector, and the filth uncovered during its proceedings was even worse than I had already imagined. We must be ever vigilant and vocal where our financial institutions are concerned and it's still not as it should be.

Keep contacting your MP with your concerns. When they are bombarded with enough complaints, they will again act.

 

[GloGal]

BANKS AREN"T BANKS ANYMORE THEY'RE JUST GREEDY BUSINESSES MAXIMISING THEIR PROFITS BY PAYING VERY LITTLE OR NO INTEREST, CHARGING RIDICULOUS FEES AND PROVIDING LESS SERVICES INSTEAD OF USING OUR MONEY TO WORK FOR THEM AND US, THEY'RE GETTING LAZY.

Yes, in a nutshell. If you can, buy their stocks when the price is right and reap the dividend rewards.

 

[Ricci]

I'm very happy with my online account with UBank. So long as I pay in $200 per month I get bonus interest. They don't care how much you take out, only what goes in.

 

[Adonis]

BANKS AREN"T BANKS ANYMORE THEY'RE JUST GREEDY BUSINESSES MAXIMISING THEIR PROFITS BY PAYING VERY LITTLE OR NO INTEREST, CHARGING RIDICULOUS FEES AND PROVIDING LESS SERVICES INSTEAD OF USING OUR MONEY TO WORK FOR THEM AND US, THEY'RE GETTING LAZY.

Banks today are Stock Market trading mediums operating for the benefit of Directors and Shareholders without providing a service to depositors - as evidenced by branch closures and reliance on apps for communication. It is time for the Government to consider restoring the needs of Australians by setting up a Federal Bank or by Nationalisation of the Banking industry.

 

[Cheezil]

To be honest we only keep our money in the bank because of safety but then again how safe is it being kept in the bank

Agree, Aust laws mean scammers target here more than anywhere else as they know the laws do little to protect us, not very safe really!

 

[Cheezil]

What happens if we all start withdrawing savings from these greedy banks & "stashing under our beds" as Malcolm Frazer famously quoted years ago? That might pressure the banks to doing something (maybe?), but a few threats from PM aint gonna make them change whilst they're making huge profits!

 

[Trevor21]

Its time that the Government stepped in to make the banks more accountable. It was interesting to look at my last bank statement which showed that there was no interest paid on my savings. it was a negative interest rate. Go figure!! You have savings no matter little it is an you manage a negative rate? Unless the bank has loaned out more than it's taking in then how can this be possible. The banks must just be there for the shareholders it's certainly not for their customers.

 

[Vio Kot]

In the past few months there has been a decent increase in banks that are now supplying 4.2% interest rate. Dont know if I am allowed to mention their names here. Suffice to say they are not part of the big four.

The big 4 are offering minimum 4% rates at the moment and other banks are offering more, but it is a hassle chopping and changing but you can always tell your bank that other banks are offering more and then see what they can do for you.

 

[Rob44]

See when Australia’s biggest banks stopped paying proper interest on your savings – and what you can do about it​

Whenever interest rates went up in the past, I used to get told it wasn’t all bad news. At least it was good for some people: savers – people with money in the bank.

I hear a lot less of that these days.

If you’ve got money in the bank, you’re now lucky to earn anything at all. One in seven of the deposit dollars held by the Commonwealth bank (Australia’s biggest for deposits) is in a “transaction account” on which it no longer pays interest.

Where interest is paid, it is so tiny compared to what it was that Treasurer Jim Chalmers this month directed the Australian Competition and Consumer Commission to conduct an inquiry, using its compulsory information-gathering powers.

The last time the commission conducted such an inquiry, into mortgage rates in 2018, it gained access to nearly 40,000 documents from the big four banks and more than 7,000 from the smaller banks.

Bad news for savers: when your rates began to fall​

What the commission is likely to find is that whereas transaction accounts stopped paying interest some time ago, so-called online accounts offering interest on large deposits were paying very reasonable interest – up until five years ago.

How do I know that’s the likely finding? Here’s what I found, when I graphed the Reserve Bank’s measure of the average online rate for a $10,000 deposit against the Reserve Bank’s cash rate, going back to 2010.

View attachment 14590
Rates to January 2023
Source: RBA Get the data Created with Datawrapper​

What the graph shows is that, until about five years ago, the online rate for big deposits moved in line with the cash rate and (as it happened) almost exactly matched it. When the cash rate was 3%, the online deposit rate was 3%, and so on.

But from 2018, the deposit rate fell away. Except for the time when both rates were close to zero during the early years of COVID, the rate paid on large deposits has stayed well below the cash rate ever since.

That’s what the official figures say. But Anna Bligh, chief executive of the Australian Banking Association, sees them differently.

“This time last year, the four major banks, nobody, no bank was offering more than 0.3% on their savings account,” she told the Australian Financial Review this month. “Right now, they’re all offering at least 4% or more. So that’s a massive increase.”

But the rates Bligh quotes aren’t the standard ones.

The Commonwealth Bank is indeed paying 4% on its so-called NetBank Saver account, but the 4% is an introductory rate for new customers only – before slipping back to 1.6% after five months.

The web comparison site Canstar finds the average big bank introductory rate on $10,000 is 3.66%, up from 0.24% before the Reserve Bank put up the cash rate by a total of 3.25 points.

But the average rate offered when the introductory bonus wears off has climbed by much less, from 0.05% to just 1.16%.

Complexity and suspected collusion makes switching hard​

And some of the high-looking rates have special conditions.

The Commonwealth’s GoalSaver account also offers 4%, but only if you put in more money in each month. If you can’t, or if you make a withdrawal, the rate plummets to 0.25%.

The Australian Competition and Consumer Commission’s inquiry is likely to find that the complex nature of the deals makes switching hard, just as does the complex nature of electricity and health insurance deals.

That’s what it found about the bank’s mortgage offerings in 2018.

It found the “opaque” nature of the offers inflated the costs of shopping around (including time and effort) and was one of the reasons why 70% of borrowers surveyed by one of the big banks said they signed up after getting just one quote.

It said the big four banks profited from the suppression of incentives to shop around and lacked strong incentives to make prices more transparent.

So why have the deposit rates offered by the big four banks dropped away?

When it came to mortgages, the ACCC suspected tacit collusion. Its 2018 report referred to a “synchronised” approach to rates seven times.

Why the banks won’t act – unless we make them​

In very recent years, the banks have had less reason to offer high rates. During the first 15 months of COVID, the Reserve Bank made available A$188 billion of funding to banks at the extraordinarily low rates of 0.25% and 0.1%.

This meant banks had less need to attract deposits, and in any event, they were overwhelmed with deposits. Elevated savings rates during COVID pushed an extra $300 billion through their doors, as worried and locked-down households sought out safe places to stash cash.

Both of these things are changing. The last of the Reserve Bank’s cheap three-year loans to banks expires mid-next year, and households are stashing less into banks than they used to.

It is possible deposit rates might be about to improve, all the more so because the banks will be under scrutiny until the ACCC inquiry reports at the end of the year.

When announcing the inquiry, the treasurer invoked fairness. Chalmers called on the banks to “pass on the interest rate rises to savers as quickly as you pass on the interest rate rises to mortgage holders”.

But fairness has little to do with it. The banks will pay depositors more only when they need to, or when they are pressured to. Until then, for many of us, deposits will earn next to nothing, regardless of where the Reserve Bank moves rates.

So if you’ve got a savings account, why not call up your bank, quote this article – and ask them what they’re going to do about it.

This article was first published on The Conversation, and was written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Our banks always seem to do well when the rest of us are not. So once again they are ripping us off. How many billions profit this quarter, CBA?

Anna Bligh; was she the once Labor premier of Queensland? I recall yet another pro-ALP unionist ring-in getting a very plum job in the Public Service and also becoming a Director and Chairman of the Board of a local bank. He too had had aspirations to become an ALP politician.

I suppose its a democracy...........

 

[Macarj]

In the past few months there has been a decent increase in banks that are now supplying 4.2% interest rate. Dont know if I am allowed to mention their names here. Suffice to say they are not part of the big four.

We live in a democracy of course you can mention the bank

 

[Happyjack]

See when Australia’s biggest banks stopped paying proper interest on your savings – and what you can do about it​

Whenever interest rates went up in the past, I used to get told it wasn’t all bad news. At least it was good for some people: savers – people with money in the bank.

I hear a lot less of that these days.

If you’ve got money in the bank, you’re now lucky to earn anything at all. One in seven of the deposit dollars held by the Commonwealth bank (Australia’s biggest for deposits) is in a “transaction account” on which it no longer pays interest.

Where interest is paid, it is so tiny compared to what it was that Treasurer Jim Chalmers this month directed the Australian Competition and Consumer Commission to conduct an inquiry, using its compulsory information-gathering powers.

The last time the commission conducted such an inquiry, into mortgage rates in 2018, it gained access to nearly 40,000 documents from the big four banks and more than 7,000 from the smaller banks.

Bad news for savers: when your rates began to fall​

What the commission is likely to find is that whereas transaction accounts stopped paying interest some time ago, so-called online accounts offering interest on large deposits were paying very reasonable interest – up until five years ago.

How do I know that’s the likely finding? Here’s what I found, when I graphed the Reserve Bank’s measure of the average online rate for a $10,000 deposit against the Reserve Bank’s cash rate, going back to 2010.

View attachment 14590
Rates to January 2023
Source: RBA Get the data Created with Datawrapper​

What the graph shows is that, until about five years ago, the online rate for big deposits moved in line with the cash rate and (as it happened) almost exactly matched it. When the cash rate was 3%, the online deposit rate was 3%, and so on.

But from 2018, the deposit rate fell away. Except for the time when both rates were close to zero during the early years of COVID, the rate paid on large deposits has stayed well below the cash rate ever since.

That’s what the official figures say. But Anna Bligh, chief executive of the Australian Banking Association, sees them differently.

“This time last year, the four major banks, nobody, no bank was offering more than 0.3% on their savings account,” she told the Australian Financial Review this month. “Right now, they’re all offering at least 4% or more. So that’s a massive increase.”

But the rates Bligh quotes aren’t the standard ones.

The Commonwealth Bank is indeed paying 4% on its so-called NetBank Saver account, but the 4% is an introductory rate for new customers only – before slipping back to 1.6% after five months.

The web comparison site Canstar finds the average big bank introductory rate on $10,000 is 3.66%, up from 0.24% before the Reserve Bank put up the cash rate by a total of 3.25 points.

But the average rate offered when the introductory bonus wears off has climbed by much less, from 0.05% to just 1.16%.

Complexity and suspected collusion makes switching hard​

And some of the high-looking rates have special conditions.

The Commonwealth’s GoalSaver account also offers 4%, but only if you put in more money in each month. If you can’t, or if you make a withdrawal, the rate plummets to 0.25%.

The Australian Competition and Consumer Commission’s inquiry is likely to find that the complex nature of the deals makes switching hard, just as does the complex nature of electricity and health insurance deals.

That’s what it found about the bank’s mortgage offerings in 2018.

It found the “opaque” nature of the offers inflated the costs of shopping around (including time and effort) and was one of the reasons why 70% of borrowers surveyed by one of the big banks said they signed up after getting just one quote.

It said the big four banks profited from the suppression of incentives to shop around and lacked strong incentives to make prices more transparent.

So why have the deposit rates offered by the big four banks dropped away?

When it came to mortgages, the ACCC suspected tacit collusion. Its 2018 report referred to a “synchronised” approach to rates seven times.

Why the banks won’t act – unless we make them​

In very recent years, the banks have had less reason to offer high rates. During the first 15 months of COVID, the Reserve Bank made available A$188 billion of funding to banks at the extraordinarily low rates of 0.25% and 0.1%.

This meant banks had less need to attract deposits, and in any event, they were overwhelmed with deposits. Elevated savings rates during COVID pushed an extra $300 billion through their doors, as worried and locked-down households sought out safe places to stash cash.

Both of these things are changing. The last of the Reserve Bank’s cheap three-year loans to banks expires mid-next year, and households are stashing less into banks than they used to.

It is possible deposit rates might be about to improve, all the more so because the banks will be under scrutiny until the ACCC inquiry reports at the end of the year.

When announcing the inquiry, the treasurer invoked fairness. Chalmers called on the banks to “pass on the interest rate rises to savers as quickly as you pass on the interest rate rises to mortgage holders”.

But fairness has little to do with it. The banks will pay depositors more only when they need to, or when they are pressured to. Until then, for many of us, deposits will earn next to nothing, regardless of where the Reserve Bank moves rates.

So if you’ve got a savings account, why not call up your bank, quote this article – and ask them what they’re going to do about it.

This article was first published on The Conversation, and was written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

I use ME bank and currently earn 3.75% on my savings a/c - and very easy to deal with

• Have both an Online Savings Account and Everyday Transaction Account
• Make at least four tap & go™ purchases per month – which must be settled, not pending – using your Everyday Transaction Account.
• Bonus interest applies to balances up to $250,000 on each Online Savings Account you open

 

[BobR]

I have savings a/c with AMP get 4.6% from May 1 on basis of $1000 deposit each month and as many withdrawls as you like. Can have up to $250,000 in a/c. Works simply for me. Without the $1000 you earn .6% I have a separate transation a/c with a susidiary of the Commonwealth which pays 0.1% on savings and it used to be the bank that lived here now it isn't really intereested in looking after anyone in W.A. despite its name..