Banks these days are finding it difficult to borrow money from other banks because of the credit crunch. They need the money to shore up their liquidity. They have turned to the general public to attract more cash deposits, and they’re using bonus savings rates to provide the come-on.

Since ongoing savings rates have declined in line with the Reserve Bank of Australia’s official base rates, you will find banks offering very attractive bonus rates. It is only natural for you to consider putting money in these high interest savings accounts, but there is one thing to keep in mind: a bonus is not a permanent thing, and the same is true for bonus savings rates.

Banks use bonus savings rates as a short-term marketing tactic to attract your money. At the end of the period, when the bonus rate expires, the banks hope that you will keep your money deposited with them.

The thing to remember is that after the bonus rate period, the standard savings rate prevailing at the time of expiry will then apply. That new rate will be substantially lower, and the drop in interest payments to you can be significant. Some bonus rates are fixed for the period, but some other banks offer a variable bonus rate.

For instance, back in the middle of 2008, a BankWest high interest savings account offered an 8.5 per cent bonus rate. But this was due to end at the start of 2009. At that stage, the natural tendency for a depositor would have been to assume a fixed bonus rate until the end of the offer period. In fact, it was a variable bonus rate and was subject to review each month to follow the RBA base rate.

To be sure, BankWest did mention in its website that this was a variable bonus rate offer. Many depositors did not realise that, however. Banks like ANZ and ING Direct fixed their bonus savings rates until the bonus offer period ends. The NAB had a different way of presenting their bonus offer: it stated a fixed bonus rate margin on top of the current prevailing savings rates (which varies with the ongoing base rate).

The trick, then, is to check whether the offered rate is fixed or variable. In evaluating variable bonus rate offers, you need to determine further the exact marginal rate for the bonus. This margin rate will combine with your own reading of how the base rate will move. You can then compare that combined rate with the fixed bonus rate offer.

It is also important for you to make a note of when the bonus savings rates offers will end. At the appointed time, you will have to think about where to put your money. One option would be to switch to another bank with an ongoing bonus savings rates offers.

But if constantly moving deposits is too laborious, then you can look for a high interest savings account that may offer savings rates lower than one with a bonus rate but assures you of a consistent payout for a longer time rather than an out-and-out windfall for a short period only.

In short, if you wish to take advantage of high savings rates offers then remember to take note of the fine print to avoid losing out.

Avoiding the Savings Bonus Rate is a post from: High Interest Savings Accounts

Financial analysts and economists are widely expecting that the RBA will announce a cut in official Australian interest rates at their meeting this month. Many are expecting that the cut cut be by 0.50% percentage points which would be a significant cut.

Normally this would be good news for home owners but the major banks and the RBA are already warning that any rate cut may not be passed on to home owners in full due to the increased borrowing costs the banks are facing during the ongoing credit crunch.

While home loan rates may not fall, don’t be surprised if the banks are keen to cut interest rates on the money they give out to customers in the form of interest from high interest savings account products and term deposits. There is probably no rush to secure a high interest account as most rates are variable and would move in line with changes by the bank you hold the account with. On the other hand, term deposit rates could be worth locking in now before they take a tumble over the next couple of weeks. Once you secure a term deposit rate then that rate is fixed for the length of the term you sign up for.

Interest Rate Fall to Cut Deposit Rates is a post from: High Interest Savings Accounts

The current financial crisis hitting the world money markets is leading to a record volume of savings account deposits being made.

As share holders see the values of the portfolios plummet there are many that are looking to move their investments into something much safer and a high interest savings account seems to be the answer.

Cash is taking it’s place as king once again!

high interest savings account products are always a popular option during times of financial instability and they generally offer a known rate of return and are considered very safe as the odds of you losing your investment are very unlikely.

The interest rates on offer have also been very competitive for savers recently as most banks are seeking to boost their own deposits and reduce their dependence on needing to borrow from other banks to fund their lending. A result of the increased cost of borrowing that banks are facing is that the banks may find it cheap to raise money by paying interest on deposits rather than through wholesale borrowing.

Generally the online savings account banks offer the best rates but some of the traditional banks with branch networks have been offering interest rates that are higher than they would normally offer as a result of the credit crunch.

Savings Rush is a post from: High Interest Savings Accounts

Using your savings account to reduce your mortgage is not only possible, but growing in popularity.  This doesn’t mean taking all of your savings and making a lump payment on your mortgage loan.  Your savings account stays right where it is.  Just having the savings account is all you need.

Australian home loans are becoming easier to get and easier to manage because of a new thing called loan offsetting.  The way it works is that you link your home mortgage to your savings account and the amount of your savings account offsets the interest on your mortgage.  For example, if you have a home mortgage for $300,000 and have a savings account with $100,000 in it, you will only pay interest on $200,000 of your mortgage.

The higher your savings account grows, the more you can offset your home mortgage interest.  Financial experts recommend this approach to a faster mortgage payoff.  They say that you should have a high interest savings account and put everything you can into it.  Including the money you use for paying your bills and day to day spending.  Even though you will be taking this money out of the savings account during the month, with the right high interest savings account you can earn interest for the time it is there.

There are many other types of mortgage programs available in Australia, and even more popping up every day it seems.  The mortgage companies realize that it’s a tough housing market right now and they are doing everything they can to earn your business.

Offsetting your mortgage is only one advantage of keeping a high interest savings account.  The other advantage, of course, is that as you earn interest your money continues to grow (if you have more in savings account than your mortgage).  Once your mortgage is paid off, the savings account will have quite a lot in it, and you could live on the home payment you are no longer making and leave your high interest savings to earn even more money for you.

Offset Your Mortgage With A High Interest Savings Account is a post from: High Interest Savings Accounts

The beginning of a new financial year meant the beginning of new tax cuts.  Most Australians are bringing home an extra $600 a year per income below $70,000.  If you have a double income household, that’s $1,200 a year, or $100 a month.  That doesn’t sound like a lot of money, but I bet you’ve already found a way to spend some of it.

A recent study in Hindu, India concluded that Australians are at the top of the list of the world’s countries with the fewest people saving for retirement beyond government supported programs.  Don’t be one of those Aussies who isn’t ready when the time comes.  Use that extra tax income to sock away for your retirement years.  Set up an online savings account or another high interest savings and have that extra portion of your paychecks deposited directly into it.  Then forget about it.  You didn’t have that money last year, you won’t miss it this year while it sits in your high interest savings or online savings account.

An online savings and a high interest savings account can differ in some ways, but all accounts have their perks and their restrictions.  Look into both online savings and high interest savings plans and see which one will bring you the most rewards by the time you retire.  Don’t worry that the high interest savings rate goes down if you take money out.  Don’t be concerned that online savings accounts are fairly new to the game.  Online savings accounts may be new but they have been tried and tested and are very reliable.  High interest savings penalties for early withdrawals shouldn’t be a concern unless you plan to retire within the next year.

Here are the questions you should ask.  Is the interest rate constantly fluctuating or is it fixed for a long period of time?  How long do I have until I retire and which type of high interest or online savings account will bring me the highest returns after that amount of time?  Put that extra money away for later years when you will need it the most.

What Are You Doing With Your Extra Tax Money This Year? is a post from: High Interest Savings Accounts

Term deposits, sometimes called certificates of deposit, differ from regular savings or checking accounts in that you agree to leave your money on deposit for a specified time, or term.  In return, the bank pays you a higher than average interest rate.  In many cases these accounts also require a higher opening deposit amount than a standard account.

The best savings rates are often found in term deposits, and the longer you agree to keep your funds on deposit, the higher the rate—though the rate advantage tends to narrow when the term extends past about 12 months.  Remember, you’re exposing yourself to a higher interest rate risk the longer you keep your funds tied up, and you’ll want the bank to reward you for that.

Once you make the deposit into a term account, there are early withdrawal penalties to contend with if you need to withdraw your money before the end of the term.  The information you receive before investing should outline these potential costs; if you don’t understand anything or it doesn’t seem clear, be sure to ask a customer service representative at the bank.  Early withdrawal penalties can be large enough to negate the extra interest you’re earning, so be sure you won’t need the money until the end of the term.

A few accounts will allow exceptions to the early withdrawal penalties for certain circumstances, like the death of one of the account holders.  Exceptions like these will be in the account agreement, which you should read before depositing money.

Think carefully about the term of the account before you open it.  The best deposit rates will be offered on the longest terms, but in exchange you’ll be exposing yourself to interest rate risk.  For instance, let’s say rates on an average savings account with no minimum balance are 2%.  You’ve found a 24-month account paying 4%–double the average.  That’s a great deal, until 12 months later, when rates have risen to 5% on regular savings accounts, and your money is stuck in the now low-interest account.  That is interest rate risk.

If you withdraw the money, you’ll pay a penalty, making the effective interest rate on your term account even lower than the advertised 4% rate.  If you leave the money in you’ll avoid the early withdrawal penalty, but you’ll be stuck in a rate that’s currently 1% lower than market rates, and could become even lower than market if other rates continue to rise.

And even though you won’t be moving money in and out of this account, access is important.  You may have a planned use for the funds once the deposit term is up, and electronic funds transfer will keep you from losing money while the funds are being mailed from the bank to you.

So, when it comes to term deposit accounts, the term is important, but so are the other account requirements.  The bank’s best deposit rates will usually be available in this type of account, which also requires minimum deposit amounts.  Think about your comfort level with different terms, and read all the material associated with this account type before you invest.

Term Deposits Explained is a post from: High Interest Savings Accounts