CHOICE Awards 2011: Best Online Savings Account

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02.Rate hunter

Rate Hunter

Many savings accounts offer a high introductory rate and then drop to a standard rate well below the market leaders. In the long term, a high standard rate will outperform any introductory offer, and the hassle of moving money around often stops people switching once they have settled on a product. Therefore, in most cases, you should choose an account with the highest standard rate that’s going to reward over time.

However, for those inclined, there’s nothing stopping investors from moving their money to take advantage of the leading rates and then switching again when a better deal comes along. Here’s what a dedicated rate hunter with no fear of application forms or moving funds would have experienced over the past 12 months.



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Rate Hunter scenario

Starting with a savings amount of $5000, historical market special rates were examined for 12 months starting from February 15th, 2010. The following steps were taken:

  • The highest special rate was chosen, keeping in mind flexibility to withdraw money and/or exit the account at any time.
  • Savings accounts requiring a linked transaction account with the same provider (normally involving additional fees), were not considered.
  • Each month on the 15th, the market was assessed again.
  • If another account offered a rate more than 0.25% higher than the one already being achieved, the money was transferred to a new account (usually requiring online application or phone call to close old account).
  • Assuming $100 was saved each week, further savings were also deposited on the 15th of each month and no withdrawals were made.
  • Repeat access to introductory rates may be limited by institutions.
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