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Warning: Aussies urged to check savings account interest rates
Australia’s corporate regulator has warned savers they may be earning less interest than they expect on bonus and welcome rate accounts.
- ASIC has urged Australians to check whether their bank is paying them the savings rate it promised.
- Introductory, welcome and bonus rates may hinge on conditions or expire after a set period, the regulator said.
- The warning comes as Macquarie Bank faces a proposed $14 million penalty over how it described its Welcome Rate to customers.
Australia’s financial watchdog has warned millions of customers to check what the interest rate is on their savings accounts, as many are not being paid what they were promised.
The Australian Securities and Investments Commission (ASIC) warned that introductory, welcome and bonus rates may only be paid if customers tick certain boxes, or may expire after a set period.
With nearly $1.8 trillion parked in household deposits, ASIC said the fine print attached to higher rates can be hard to follow.
“Banks need to make it simple for customers to understand what they have been promised and then deliver on that promise,” ASIC Commissioner Alan Kirkland said in the statement.
According to the Australian Competition and Consumer Commission’s (ACCC) Retail Deposits Inquiry, roughly seven in 10 bonus interest accounts missed out on their bonus rate in an average month during the first six months of 2023.
“If the conditions are too complex or difficult to decipher, customers may miss out on interest they could otherwise be earning,” Kirkland said.
ASIC said it will keep the banks under enhanced supervision on the issue and step in where customers are harmed.
Last year, the Federal Court ordered ANZ to pay a $40 million penalty for misleading customers about savings interest rates and failing to pay tens of thousands of them the rate they were promised.
On Wednesday, ASIC announced that Macquarie Bank faces a proposed $14 million penalty after the bank admitted in the NSW Supreme Court that it breached the Corporations Act over how it described its Welcome Rate for new savings customers.
ASIC alleged the bank had called the offer both a “welcome variable rate” and a “bonus,” language that could leave customers thinking it sat on top of the standard variable rate.
“At a time when Australians are contending with cost-of-living pressures, consumers deserve clear information about savings rates and the financial benefits they are promised,” Kirkland said of the Macquarie case.
How to maximise your savings interest rate
“Higher advertised rates may only apply for a limited time or may depend on the customer meeting certain conditions,” the ASIC Commissioner said.
Moneysmart, ASIC’s personal finance website for consumers, advises savers to first check what rate their account is actually earning, and whether the advertised rate they signed up for is introductory, promotional or conditional.
Savers should know exactly what it takes to unlock a higher rate, such as making regular deposits, limiting withdrawals or growing their balance, the regulator noted.
Customers should also find out how long a promotional rate runs and what it drops to once the offer ends.
Moneysmart also suggests checking whether another account offers a better rate or conditions that suit them more.
Anyone who can’t make sense of their account’s conditions, or can’t easily tell what rate they are earning, should ask their bank to explain it, Kirkland said.
“And if you have met the conditions for a higher rate but aren’t receiving it, raise it with your bank,” he added.