Stashing your money in the bank and waiting for it to grow with the standard interest rate is the usual path for growing your account. However, it will take a very long time before you see it bear fruits. But with the option to invest your money in a high-interest online savings account, you can give your savings a boost and achieve your financial goals faster.

What is a High-Interest Savings Account?

A high-interest savings account, more popularly known as an online savings account, provides a higher interest rate compared to a normal transfer account. It’s designed to help you quickly save money by taking advantage of compounding interests. Banks usually calculate the interest daily and pay the amount earned on a monthly basis.

High-interest savings accounts offer attractive introductory rates during the first few months following the opening of your account. You can earn, for example, 3% interest for the first 6 months. After that, the interest rate on your savings account will drop down to the standard rate which is usually much lower than the introductory offer.

A high-interest online savings account is usually linked to your ordinary bank account, allowing easy transfer from one account to another. Some banks will require you to have an account with them while some will let you link their high-interest savings account to a transaction account from a different bank.

Pros and Cons

High-interest savings accounts have their advantages and disadvantages over term deposit and other savings options.

Advantages

-          It’s relatively safe compared to other investment vehicles. Deposits up to $250,000 are insured by the Australian government so in case the bank closes or loses its business, you can still recover the guaranteed amount.

-          Earnings of your account are immediately reflected. In just a matter of months, you’ll see your account growing as it earns interest. This is the best place to park your money while you study about other investment options.

-          It can take you faster towards your financial objectives since you’ll be earning a higher interest rate on your account.

-          Little to no fees are charged on high-interest savings accounts.

-          You can withdraw from your high-interest savings account anytime you want unlike in term deposit where you can’t touch it unless you’re willing to incur penalties.

-          Since they’re online accounts, you can access them 24/7 for free. You can also manage them through your mobile phone.

Disadvantages

-          Accounts with high balances are usually given lower standard variable rates. High-interest savings accounts are ideal for minimal deposit amounts with short-term profit objectives.

-          Transfers from your high-interest online account to your transaction account may take days to complete. This can sometimes make your money unavailable when you need it.

-          There are a number of conditions you have to satisfy in order to retain the high-interest rates applied to your account.

-          Bonus rates only apply for a few months. After that, your account will be earning the standard variable rate used by the bank.

Banks Offering High-Interest Savings

Small and large banking institutions offer high-interest savings accounts with varying rates and requirements. Here are some of the savings accounts you could consider.

1)      ING Savings Maximiser

Their maximum variable rate is 2.80% pa, while the standard variable rate is 1.00% pa. The maximum amount where these rates can be applied is $100,000. There are no monthly fees or minimum opening deposit required to open the account. However, you must be at least 13 years of age to apply.

2)      RAMS Saver

You can earn an additional 1.65% pa on top of the variable interest rate if you satisfy the conditions associated with this high-interest savings account. You should deposit at least $200 per month, maintain a balance of at least $200 up to a maximum of $500,000, and make no withdrawals during the month.

3)      UBank USaver

USaver can give you as much as 2.87% pa as long as you deposit $200 or more into your account every month. Another USaver option gives 2.31% pa but it only applies to balances amounting up to $5,000; anything in excess won’t earn you interest.

4)      RaboDirect High-Interest Savings Account

RaboDirect probably offers the highest among its peers with a 3.05% pa variable rate on deposits amounting up to $250,000. This rate applies for the first 4 months only after opening the account and is subject to change.

5)      Bank of Queensland Fast Track Saver Account

The Fast Track Saver Account can give you as much as 3.00% pa on balances $250,000 for the first 4 months. You’re required to deposit $1,000 into your account each month, though, to earn this bonus. Its greatest advantage is that you can make an unlimited number of withdrawals and still be eligible to receive the bonus interest.

Conclusion

A high-interest savings account has a number of advantages over a term deposit or an ordinary bank account. It provides higher returns but that’s true only for a short period of time. If you’re looking to boost your savings account for a short period of time and still have the flexibility to use the money whenever you need to, then you should strongly consider investing in a high-interest online savings account.