Is your bank account costing you more than it should?

Most people view their savings account as a safe place to keep their hard-earned cash. While this is true, that same bank account might also be quietly eroding wealth away. From fees, low rates, and the invisible hand of inflation, several factors could be diminishing your savings more than you imagine.

Here are a few of the things to look out for so you can get the most out of your savings account:

Fees: the cost of banking 

Some providers require fees for transaction accounts, while individually small, can accumulate significantly over time. 

However, these fees have become less common due to the lower overheads of internet banking. If the account provider does require a monthly fee, these can often be waived under conditions such as age or depositing a certain amount monthly.

Interest rates

Many savings accounts offer base rates as small as 0.05%. To put this into perspective, on a $10,000 savings balance, this translates to a mere $5 in annual interest – hardly enough to buy a cup of coffee. 

This situation can creep up on you if you're not paying attention - base rates often apply after promotional periods end or when account holders fail to meet specific conditions for a higher ‘bonus’ rate. 

So, when signing up for an account, be sure to keep meeting the bonus rate conditions or jump to a higher rate account after the promotional period ends.

The silent wealth eroder: Inflation

Inflation represents the biggest threat to your savings, acting as an invisible tax on your money. When prices rise faster than your savings grow, your purchasing power diminishes over time. 

Consider this practical example: if your savings account earns 4% interest annually while inflation runs at 6%, your money is effectively losing 2% of its value each year. 

In real terms, $10,000 saved today would have the purchasing power of approximately $9,800 after just one year. So, make sure that your savings are set up with an account offering higher rates than CPI (consumer price index) inflation.

As of 14 Jan 2025, CPI current sits at:

• Monthly (12 months to November) - 2.3%
• Quarterly  (12 months to September quarter) - 2.8%

Maximising your money's potential

Fortunately, there are ways to protect and grow your savings. Providers offer significantly higher interest rates, with certain accounts providing rates well into the 5% range. These rates often come with conditions, such as regular deposits or minimum transaction requirements, but meeting these criteria can substantially boost your returns. 

Compare savings accounts 

One way to make sure you get the most from your savings account is to compare different providers, as interest rates can vary a lot. Head over to our savings account or term deposit hub page and check out some of the providers we track.