Savings Accounts, New Products, New Competition
2008 has been a fantastic year for those seeking to open up new bank accounts, although interest rate has been declining, hence reducing the potential interest from savings account, it has been a great year in terms of choices to consumers.
With the government’s decision to provide guarantee for bank deposits including savings accounts, fuelled by the uncertainties on the sharemarket and the bond market, a large amount of funds have flown back into banks, both into the traditional term deposits and savings accounts.
Banks are launching new savings accounts
Banks are launching more and more variety of new savings accounts attempting to increase their savings size and also market share especially protecting them from losing their top wealthy clients from 28th November when the Government guarantee becomes effective, and is likely to cause major banks losing customers to other savings account launched by regional banks.
Below are some of the savings accounts products announced or planned:
Tax Free Savings Accounts
Tax Free or tax-advantaged savings accounts are also being launched in Australia, as well as Canada and many European and US markets. Some tax free savings accounts have been supported by the Government as a strategy to encourage consumers to increase their savings.
Regular Savers Accounts
Regular savers accounts are also becoming popular in Australia. It is also catching up with overseas trends in terms of savings accounts for property savers. This type of savings account usually allow minimum withdraws or no withdraws, but allows account holders to close their savings account anytime they want to withdraw the fund out.
In return, the savers will receive above the market rate interest rates.
Kids Bonus Savings Accounts
How banking system has become so competitive, even kids are now being targeted as customers. ANZ, Bank West, St George and Commonwealth Bank have all launched their kids or education savings accounts – all with intention to encourage parents to put more savings into special savings accounts.
The advantage in these accounts are to encourage long term savings – features of kids or children savings accounts usually include higher interest rates. But taxation on minors in Australia is very high which means interest earned could be taxed at more than 50%, therefore, these accounts are not designed for large sums of savings.
Online Savings Accounts
Online savings account is definitely the biggest winner in Australia in the recent years. Online savings accounts have, initially targeted at the younger Internet age generations, but its popularity has now spread wide across to all age groups.
There has been fast increase in consumers in the 35 to 50, or 55+ groups taking up online savings accounts as their banking option, many even as their primary banking option.
The big players in the online savings accounts now include ING, HSBC, Citibank, RabboPlus, BankWest, all the 4 major banks, and with Westpac’s acquisition of St George, its popular Dragon Savers Online Savings account will also be now under Westpac’s umbrella.
No Transactions Accounts
This is similar to the regular savers accounts described above. The difference being transactions are permitted, but this will attract transaction fees each time you make the request. The fees can be higher than other savings accounts, but the interest is also higher as a reward for account holders.
Cash Management Accounts
Macquarie Bank is the pioneer in establishing cash managements accounts, also known as CMT, it is amazing how a financial institution can build its fortune from one simple bank account. Since the launch of Macquarie’s CMT, many institutions have launched similar products. CMT works similar to savings accounts, but it has several features:
1.   Many cash management accounts have been “sold” through financial advisors and stockbroking firms – this allows them to receive some commissions.
2.   Cash management accounts usually have minimal fees compared to bank savings accounts
3.   Access to cheque books, making this account also more flexible
Cash management accounts also provide similar interest rate, and can be higher sometimes than major banks’ savings accounts.