Best Interest Rate? (Savings) - Is over 3.5% possible?

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  CyberMurning on 11/11/2015 - 11:16

  +2

  i heard people mentioned rams?

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  cypher67 on 11/11/2015 - 11:18

  ME bank does 3% on a term deposit, most of those goal saving accounts only pay the interest up to $100000. Most banks will do a better rate than what they advertise, however you really need to shop around & need to put a price on your own time.

  • 

    Click_It on 11/11/2015 - 11:25

    Thanks.

    We're in a situation where we're no longer home owners for up to 12 months, thus that lump sum available. So we're just looking at softening the blow of living costs until we're back into home ownership.

    We very nearly kept an investment property - positively geared which would have covered the 12 months far better than this will, but believe it would have been a long term mistake so we cut our losses now (so to speak, actually made a small profit).

    As for your comment on time, my time is going pretty cheap at the moment so I'll happily price around. Thanks :)

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  17833 on 11/11/2015 - 11:26

  +2

  https://www.ozbargain.com.au/node/217725#comment-3163010 <— Perhaps it was this comment that you read, if so I think the interest rate mentioned was an old not updated page. I think RAMS woould have one of the highest rates at the moment with 3.6%, max amount of $250,000, have to deposit at least $200 a month and make no withdrawals (so I guess you would have to a max initial deposit of $248,000 so as to not go over to $250k in a year. You probably/may know already but the effective interest rate of a term deposit will be slightly less than the advertised rate if interest is calculated annually not monthly. So something else to keep in mind.

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    Click_It on 11/11/2015 - 11:44

    Yes! Thanks. That wasn't where I originally read it but that is exactly the one i was trying to recall (the 3.91%) - okay so that figure sounds outdated, but 3.6% no fuss still sounds pretty good. It'll be interesting if I can get one of the banks to beat that, but at the end of the day the difference from say 3.6 and 3.9% is only ~$900 (or $15/week). But this is OzBargain so I will still see what's out there. But I'd be happy with 3.6% if that's the best I can get. Softens my living expenses by $176/week (almost 50% of our rent).

    Your comment about $248,000 - does this mean if I exceed $250,000 the interest will only count on the first $250,000? This is what I assumed and from your comment sounds like your interpretation is the same.

    Yes I've seen some calculate interest weekly even. I haven't calculated the loss between annual and monthly interest calculations but I am aware it'll be less over the same period. A good point to mention.

    EDIT: Troy below explained what happens after $250,000 (you lose 0.5%, ouch!).

    • 

      cheapbloke on 11/11/2015 - 16:57

      Not sure how you calculated $900. For 0.3% interest difference you only get an extra $750 a year. You get a few moolas more from compounding but nowhere near $900.

      • 

        Click_It on 11/11/2015 - 19:34

        Even less reason to bother about it :)

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  troy1976 on 11/11/2015 - 11:44

  +3

  Hi. I've been in a similar situation and spent a fair bit of time looking for something better than RAMS (and which meets the conditions you state) and I haven't found it.

  Just be aware that the rate falls about 0.5 percentage points (from 3.6% to 3.1%) on the entire amount of your savings once you go over 250,000. So to avoid losing that, you need to do a little bit of calculation as to what you would earn on less than 250,000 over your intended timeframe plus the $200 per month you need to deposit to get the 3.6%.

  In practice, if you have about a 12 month period in mind, you wouldn't put more than about $235,000 in the account to begin with and then put the rest of it in another account where you can get above 3.0%. It is actually rare to find an ongoing account offering over 3.0% without tedious conditions (other than no withdrawals and a small monthly deposit) but they are out there as long as you don't mind opening possibly a couple of new accounts and/or ringing that financial institution every few months to ask them to continue the bonus rate.

  The alternative is to stuff it all in RAMS and just accept 3.1% which defeats your highest interest goal and obviously puts you over the 'guaranteed' 250,000 limit but would be much simpler especially if you have a fairly solid 12 month only window.

  • 

    Click_It on 11/11/2015 - 11:54

    Thanks for explaining all the scenarios. What an awesome post.

    I wasn't sure what happened over $250,000 - I had wrongly assumed they'd ignore contributions at that point and only give interest on the first 250k, but losing 0.5%, ouch. Definitely in my best interest to remain south of that figure.

    I'm thinking I might just save myself the effort, following your advice and just lock in this 3.6% relatively hassle-free deal.

    So that $235-238k area seems to be about the sweet spot then, still allowing $200 monthly deposits.

    I might have to see what I can do with the remaining $50-70k then. Maybe it's best to have 2 accounts with RAMS, balance it out so I can make $200 monthly deposits to each, one in my wifes name if need be. Unsure if that's allowed at the same bank.

    You've given me food for thought and sounds like I've saved a lot of time to reach the same conclusions anyway. Thank you.

    • 

      skinner on 11/11/2015 - 12:44

      Yeah I think the best way to go would be to just split it between two accounts, one for you and one for your wife. Could split it 50/50 or have a look how it would affect your tax, if one of you is earning more than the other could be beneficial to go 70/30 etc.

      The other alternative is to ring around and see what rates you can on a term deposit. There are usually some unadvertised specials available, they can change daily though so it's a bit of pot luck. If you slip in the convo that the money is for a house deposit they might offer you a bit more in the hope they will snare your home loan in the future as well.

      • 

        Click_It on 11/11/2015 - 12:57

        Some good points thanks.

        Yeah in my case probably a 70/30 split could work better as we're trying to keep her income tax free (around $20,000) to contribute to my larger income.

      • 

        Gotchas on 11/11/2015 - 19:42

        You crazy
        I'd rather get 0% then the wife

    • 

      Zonty on 11/11/2015 - 13:35

      +1

      do not forget calculate tax on interest. if check both income your and your wife income hope one of you have lower income then 38000 per year otherwise u will pay 31.5% tax on interest so check tax table for save could cost around$2000 tax

      • 

        Click_It on 11/11/2015 - 16:21

        Yeah good point. I'm going to be over $38,000 anyway so I'll wear the bulk of this and put the left overs in my wifes name.

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  eatwell365 on 11/11/2015 - 21:50

  Can use this calculator and ratecompare

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  FirstNameLastName on 12/11/2015 - 09:49

  +1

  I was getting about 9% in 2008 :(

  (mind you, house prices were going up even more, so I was actually losing out by saving for a deposit.. silly me for trying to be financially prudent during a boom that I wasn't benefitting from.. due to being born at an incorrect time)

  With the big banks recently hiking their loans by .25%… surely they have also offered their savers a further .25%? (tongue firmly in cheek)

  • 

    eatwell365 on 12/11/2015 - 23:13

    +1

    Deposit interest rate was 18.49% back in 1989. 16% actual in the account. Life was good with money in the bank.

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  Deridas on 12/11/2015 - 12:43

  ME Bank 3.55% online saver, only catch is got to use 1x PayPass per week.

  • 

    Click_It on 12/11/2015 - 16:04

    Yeah, deal breaker for me. Weekly is too hard work, 4x monthly could be acceptable but even that would get on my nerves to be honest.

    RAM's 3.6% is less hoops to jump suits me better.

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  phila63 on 15/11/2015 - 18:28

  +2

  When the interest rate is subject to a maximum balance, make a spreadsheet to calculate the interest for the month and 2 business days before the end of the month, use goal seek to determine how much to withdraw 2 days before the end of month that will give you a balance on the first day of the new month inside the maximum.

  i.e. if max balance is $200k, keep the balance at $199,999.99 for most of the month. 2 business days before, withdraw $x so that when interest is calculated at the end of the month and allocated to your account, the balance after interest doesn't exceed $200k on the 1st day of the month and penalize you with a lower interest for that month.

  Most transfers happen overnight but occasionally 2-3 days so allow for that.

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  paddyadrian on 16/11/2015 - 13:19

  Rams are dropping their rates as of 18th November 2015. Rate will now be 3.4% incl bonus rate for balances <250K

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    Click_It on 16/11/2015 - 13:46

    Thanks for the heads up. I'll probably chat to some banks but I imagine this is still the best I can do excluding ME BANK's 3.55% with it's annoying paypass requirement, in any event ME BANK will probably also lower their rate anyway.

    • 

      Steptoe on 16/11/2015 - 21:19

      Depends if RAMS are leading or lagging the rest.

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  Olga on 20/11/2015 - 15:13

  What about RABODIRECT online account High interest savings account 3.5% for first 4 months

  Kick-start your savings with a bonus 0.95%p.a. for the first four months (up to $250,000) on top of our standard variable rate

  No fees or required deposits or usage….

  Just you have to use a plastic calculator gizmo to generate pin everytime you logon!!!