03.Credit unions and other lenders
What about credit unions and other lenders?
Credit unions and other lenders are almost as competitive as banks on the savings account scene. As you can see from the examples shown in the table, it’s not only the major players offering high rates on accounts that are easily accessed online. These accounts also offer fee free online banking structures - you can apply online too.
Past CHOICE bank satisfaction surveys, and recent data gathered through our Better Banking campaign, have shown that many people find credit unions and smaller lenders offer personalised service that is often missed at the major banks, which have recently been plagued with everything from class action lawsuits to major computer malfunctions. Consider these accounts if you think a credit union or smaller lender may suit you.
What about other investments?
Savings accounts typically allow flexibility with your investment money. They should provide access to your money within two days, and for savings goals or beginning an investment, they also provide some easy returns. Even investors with large amounts use high-interest savings accounts for various purposes.
However, you may also wish to consider other investment types. A term deposit can lock in an interest rate, protecting your investment if rates go down. The downside is your access to funds is limited and you may incur penalties if you withdraw money before the term is up. At least for conditions in the past 12 months, we found minimal difference between competitive savings accounts and term deposits for those investing relatively small amounts.
For example, Rural Bank’s ONE term deposit offered 6.55% on a 12 month term deposit in February 2010. A $5000 investment would have returned $328 in interest. Using that same initial investment (with no new deposits), the Usaver account returned $325 interest.
Mortgage offset accounts are another way people manage their investment money. These accounts allow you to offset the debt you owe on a mortgage, effectively reducing the amount of interest you pay. In the long term, this can be highly beneficial due to the fact that you are normally accessing an even higher return on your money. Just make you are not paying excessive fees, and don't let an offset account stop you from having a savings plan.
Investment returns are always affected by what is happening in the market, such as interest rate changes. Consider speaking to a reputable financial advisor if you want to know more about investment opportunities for your situation.