A high-interest savings account is a ‘savings account’ that gives a higher rate of interest. Since it offers a high-interest rate than a standard savings account, there are generally few requirements to meet to earn the high rate.
How Do These Accounts Work?
Here is how interest is applied, how you access your money and the conditions you might need to meet with the high-interest account.
Interest Rate
You will get a bonus interest rate each month, provided you meet the account conditions on the base interest rate. It allows you to earn additional interest each month. Alternatively, a standard savings account will typically only offer the base interest with no possibility of earning additional interest.
The money in your account benefits from the compound interest, which is evaluated daily and paid monthly. Compound interest enables you to collect interest on your interest, helping your fund grow quicker.
Access To Your Savings
You typically link a high-interest account to your standard bank account, preferably with the same bank. When required, this enables you to conveniently move funds back and forth from your high-interest savings account to your everyday bank account.
This is helpful, as high-interest accounts do not offer a debit card to access your money (but standard accounts do). However, you cannot spend funds in your savings account using a debit card. You still have an option to transfer it to your standard bank account and spend the money there.
Conditions You Need To Meet
To get the high-interest rate on your savings, you typically need to match a few account requirements. It varies from bank to bank, yet it often asks you to deposit a set amount of funds each month and open a standard bank account with the same bank.
Some accounts also want you to make a certain amount of purchases each month from your linked regular bank account.
Benefits Of High-Interest Savings Account
Your Funds Are Safe: Your money is protected under the Government Guarantee Scheme by the Australian government.
Grow Your Savings Faster: Compared to a standard savings account that would not pay much interest and a regular transaction account that typically pays no interest, a high-interest account can help you build your savings faster.
There are no fees: High-interest accounts do not impose any account keeping charges. Moreover, there are no fees to move money out or to add money into the account.
