It is already a well-known fact that the Australian consumer has undergone a shift in attitude regarding money over the past four years or so, i.e. since the climax of the global financial recession. Though some of the more optimistic financial analysts will argue that the recession is now over, what with the slow upturn in the US and Chinese economies, consumers remain cautious about money, by and large.
Their main goal is not to decide how to spend, but to identify the best ways to save; even those more courageous, who are considering a return to the investment market, are still rather more interested in secure alternatives, such as savings accounts and nest eggs, rather than the more volatile shares, bonds, and real estate markets.
That being said, the savings market in Australia has become even more competitive over the past year than this shift in money-related attitudes may have warranted. Banks Down Under are seeing new regulations imposed on them, which demand that they secure their transactions with more liquidities than before.
Attracting new savings customers has been an intense battleground for quite a while, but an ever-so-subtle shift is now in the making on said market. For the first time since the beginning of the recession, the assumption that term deposits are the most profitable savings product for banks is being challenged. Back in 2009, online ‘bonus’ savers’ accounts did not pose much of a threat to secure, profitable term deposits.
Most Australian banks were striving to attract term deposit clients and they were hiking up their costs in this department, often beyond the reasonable doubt. Nowadays, though, online savings accounts which pay out bonus interest premiums to savers, are becoming the preferred alternative, by some accounts – and of course it all boils down to the cash rate that the two classes of products offer, respectively.
Three and a half years ago, bonus savings accounts had a low-interest rate – some 50 points lower than the official cash rate at that time. Nowadays, the balance has shifted, and bonus savings products offer interest rates that are some 100 points above the official cash rate and even 200 basis points for the most profitable ones.This argument alone might make these products appealing to customers, but it’s worth wondering whether it is sufficient to qualify bonus savings accounts as the most profitable option of the two.
Here is a cursory look at the comparison between term deposits and ‘bonus’ savings accounts. Term deposits- They are highly secure investment and savings products, especially those which come with fix interest rates. They also allow savers to literally lock in just about any amount of money.
The interest they pay may be lower than on other investment options, but what they lack in immediate profitability, they compensate in security. – Some term deposit products, such as the ones we found through research at an overview, come with no minimum amount required as the contribution. ‘Bonus’ savings accounts- Their interest rates are currently higher than those offered for term deposits. – They pay sizeable interest, but in many cases, the bank will only award the bonus premium to savers who have made no withdrawals during a pre-established span of time.- Some ‘bonus’ savings accounts will require a minimum contribution, on a regular basis (either monthly or less frequently).
In brief, bonus savings accounts can tend to be the better option for people who don’t want to relinquish all access to their money, by saving them up in a term deposit account. However, they do come with just enough exceptions and catches as to rouse a few suspicions here and there. As such, our advice is to read the fine print very thoroughly, before committing to such an online savings product.