How to select the best high interest savings account

Having decided you want your hard earned money to work harder for you now it’s time to find the high interest savings account that will deliver you the best returns. The first step when assessing the savings account options is to not focus solely on the accounts interest rate, sure high interest rates are certainly very important, but the terms and conditions, which sometimes are associated with these rates, are also extremely important. In this guide we will provide an overview of the factors you should consider when making your account selection and offer some hints and tips on how to maximize the returns on your money.

Interest rate - In your pursuit of the highest rate of return on your savings it is important you consider the standard variable interest rate in association with any bonus or introductory interest rates the account features. It is these bonus and introductory rates that deliver the high interest rates for savings amounts under the $250,000 level.

Bonus and Introductory rates generally work in the same way, whereby they are added to the standard variable rate, either on going, or for a fixed initial period. So if an accounts standard variable rate is 0.5% p.a. and the bonus or introductory rate is 2.5% p.a. the rate applied to your savings would be 3.0% p.a. The critical fact on bonus rates is that they generally only apply if the stipulated conditions made by the account provider are met, typical conditions stipulated include:

• Must be a new customer
• Make a minimum deposit of $X each month to retain the bonus rate, the deposit can range from $1 up to $1,000 per month.
• Make no withdrawals from the account each month to retain the bonus rate

In the case of introductory rates, these tend to be offered for between 3-6 months post which your rate will revert back to a lower rate which will be stipulated upfront by the account provider.

Access to your savings - Higher interest is generally paid on accounts which have limited access, with those stipulating no withdrawals per month tending to offer the best interest rates. This limited access could also work in your favor as it imposes the discipline of leaving your savings alone, and penalizes you heavily for dipping into them, by either charging a fee or losing interest..

Online savings accounts - These accounts costs the banks much less to administer than those which offer branch access and so they tend to offer higher rates of interest on them. Generally you will need to link these accounts to a transactional account so you can deposit and withdraw money from the account, some banks insist that the transaction account linked to the online savings account is from the same bank.

Linked accounts - All online savings accounts and a range of other high interest savings accounts are required to be linked to a transaction account. The account providers stipulate whether it needs to be a transaction account from the same institution or if it can be an account held with a different bank. These linked accounts are required so that you can transfer money between the accounts, often at no cost.

Fees - High Interest savings accounts that have no fees can be found, particularly the on line only accounts, though many also charge account maintenance fees. If you are required to have a linked transaction account to your savings account be sure to check the fess associated with that account.

Withdrawal Penalties - If you choose to make a withdrawal from your account when the terms stipulate no withdrawals are permitted to retain a bonus rate your rate will revert to the lower rate. 

Calculation and payment of interest - The best high interest savings accounts are those that calculate interest daily and pay the interest into your account monthly. These accounts that offer monthly interest payouts, and that pay interest on the entire balance in your account should be high on your shortlist. 

Tiered Interest Rates - Many high interest savings accounts offer tiered interest rates whereby the more you deposit and keep in your account, the more interest your earn. You should also look out for any maximum amounts, whereby some accounts will only pay their top interest rates on sums upto a capped amount, with amounts above this attracting a lower rate.