Bank ‘tricks’ robbing Aussies $1,500 per year in savings: ‘On purpose’

Aussies are collectively missing out on billions of dollars because of a range of bank “tricks”. Savers are sticking with low-interest savings accounts and not earning the best rate on their hard-earned cash.

A person is losing an average of $1,500 each year by being with the wrong savings account, a new research paper by financial services tech company Upworth found. That works out to a combined $30 billion in interest annually due to factors like wildly different savings rates, confusing terms and conditions, and frequent rate changes.

Upworth co-founder Maxime Chaury told Yahoo Finance banks used several methods to try to minimise the amount of interest paid to customers on their deposits.

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“[Retail deposits] represent 30 per cent of the total funding of banks. So banks are trying to decrease as much as possible their funding cost and pay effective interest rates that are as small as possible for depositors,” Chaury said.

“They leverage behavioural biases that we have, to make sure that the effective rate that we receive is low.”

The research found someone could earn between 0 to 5.75 per cent interest on their savings rate depending on which product they went with. Interest rates can also vary significantly within a single bank for “no objective reason”.

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Savings accounts are ‘complex on purpose’

RateCity research director Sally Tindall said most savings accounts come with “reams of fine print” that limit some customers from getting the maximum rate of interest on their money.

“Monthly terms and conditions to qualify for bonus interest is the one that springs to most people’s minds, but plenty of savings rates can depend on how much money you have in your account, how long you’ve had the account open for, even how young or old you are,” she told Yahoo Finance.

Chaury said savings products are made “complex on purpose” through their design and conditions. Plus, frequent changes can make it harder to stay on top of the best rates with many banks purposely applying recent rate hikes to the bonus portion of the rate, rather than the base.

“Most of us get overwhelmed by the complexity and they just give up and they either do nothing or take whatever comes. These biases really play a role,” he said.

In the first half of 2023, the Australian Competition and Consumer Commission (ACCC) found 71 per cent of bonus savers did not qualify for the extra bonus interest each month.

“This is a staggering figure, particularly considering many bonus saver accounts have base rates well below 1 per cent per annum,” Tindall said.

Top savings rates right now

Tindall recommended people take the time to get across the different types of accounts in the market.

“Once you have a handle on which type of account is the best fit for your finances, your savings goals and your lifestyle, then it’s just a matter of picking one that delivers a decent rate of return,” she said.

Here’s RateCity's round-up of the highest ongoing savings rates, with bonus conditions:

If you don’t want to jump through any hoops, these are the highest ongoing savings rates with no conditions attached:

* Includes an intro rate of 5.35% on balances up to $250K for first 4 mths. ^ Additional criteria may apply from October 2024.

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