Saving money may be an ordinary task for many Australians; however, deciding where to invest one’s hard-earned money may seem challenging. Comparing savings accounts from different financial institutions, one would come across various numbers, deals, and terminologies. Two of the main aspects to know are base interest rates and bonus interest rates. Learning the difference between these two rates will significantly help maximise earnings and reach financial goals much sooner.
Base Interest Rate Definition
By opening a savings account, one signs an agreement that a particular financial institution pays the individual a certain percentage for depositing their money there. The base interest rate is the primary, usual rate at which you earn from savings. In simple terms, you receive this certain rate as a regular income from the financial institution just for keeping one’s money with the bank.
You can calculate and earn interest without any effort, except for saving money and avoiding any withdrawal. Though this rate seems low when looking at today’s economy, it is quite safe to rely on it. Base interest rates do not require you to make any financial tricks, and they are usually paid daily and withdrawn monthly. Open a savings account with ING, for example, and you’ll get this rate.
Bonus Interest Rate Definition
To encourage saving money, some financial institutions offer their clients a certain extra bonus interest rate on top of the usual rate. This means an extra percentage on the money deposited; however, there is a catch. In order to get this extra percentage, the client needs to fulfil certain requirements every month.
Those can be depositing a certain sum into your account, say, 10 percent of your salary, or making several debits using the linked debit card within the month. Moreover, some banks require depositing money on a savings account in a way that makes the balance increase throughout the month. Otherwise, the client does not get this extra percentage, and they continue getting the usual base rate.
Maximising Your Earnings
If you want to earn from a savings account the maximum possible income, then you need to use both interest rates available at the same time. In other words, adding these two rates to each other provides you with maximum variable interest rates offered by the banks.
For instance, if a financial institution offers a base rate of one percent and an extra bonus interest rate of four percent, then you can earn at the rate of five percent. However, to keep getting this maximal interest rate, you need to meet all the requirements of the bank every month. Otherwise, you only get the base rate, which is significantly lower than the maximal one. For this reason, it is important to find a savings account in which all monthly requirements are natural and easy for you to accomplish.
Maximising Your Savings Potential
After learning everything about interest rates, finding the best savings account becomes a much easier task for one to do. It is crucial to learn everything about the requirements for your account and not to waste your chance to get extra money.
Taking a closer look at your finances and reviewing your account, you should find out whether the monthly requirements of your bank fit your lifestyle. Should the conditions prove to be too tough, this can serve as a signal to look for another savings account with more suitable conditions!
