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CHOICE suggests changes to savings accounts to make banking fairer

Our submission to the ACCC deposits inquiry outlines ways to help consumers get better returns on their savings.

Last updated: 13 June 2023


Checked for accuracy by our qualified fact-checkers and verifiers. Find out more about fact-checking at CHOICE.

Need to know

  • The ACCC is investigating the interest rates banks give savers for the money held in deposit accounts
  • CHOICE has delivered a submission, suggesting ways to help consumers get more on their savings
  • The suggestions include requirements for fair value, communicating the best rates to customers and making it easier to close an account

Banks would be required to ensure they're offering fair value on deposits, move customers to their best savings rate and make it easier to close accounts, under new proposals from CHOICE.

In May, CHOICE surveyed over 7000 savers on these three priority recommendations – part of a larger list of seven – which it handed to the ACCC to consider in its inquiry into retail bank deposit accounts.

The commission is examining the interest rates on deposit products such as transaction and savings accounts and how they compare to those on loans.

In announcing the inquiry in February, the ACCC noted that while interest rates on home loans have gone up in line with the RBA cash rate over the last year, increases on rates paid to depositors had been "smaller or conditional".

Consumers fed up with unfair rates

Responding to CHOICE's survey, over 96% of savers said they thought the rates they were getting were "unfair". And while many banks offer higher bonus rates, 45% of respondents said they had had an unfair experience with these products or hadn't been able to meet the conditions required to qualify for them.

Retiree Walter from NSW says he struggles to deposit the $1000 into his account each month his bank asks for in return for providing its 4.8% bonus interest offer.

Over 96% of savers said they thought the rates they were getting were "unfair"

If he fails to deposit enough money, the interest he earns on his account drops to the standard 0.8% – a rate he's unimpressed by, considering the increases he's seeing in his home loan interest.

"If you look at the interest rate hikes, I think it's really unfair," he says. "I'm getting angry, but you can't do anything about it. You feel a bit helpless, actually."

CHOICE has previously noted that retirees like Walter often rely on the interest earned on their savings accounts to make ends meet. Our survey results reinforced this, with many people who are retired or on low incomes saying they're being harmed by low rates.

Banks should be subject to a 'Consumer Duty'


Introducing a Consumer Duty would help to ensure customers are getting a fair interest rate on their savings.

In its inquiry, the ACCC will be examining how banks set the rates on deposits, the conditions that must be met to qualify for different rates and how those conditions are decided.

One of the suggestions CHOICE has made to the commission is that banks be subject to a new "Consumer Duty", similar to one about to come into force in the UK, which says institutions must "ensure their products are fit for purpose and offer fair value".

CHOICE head of policy Patrick Veyret says the "game changing" measure could help deliver higher rates on deposit products.

"It's critical that Australia adopts the United Kingdom's new Consumer Duty. This Duty will require banks to pay regard to the fair value of interest rates on savings accounts."

Customers should be switched to the best rate

Another of our recommendations is that banks should have a legal obligation to switch customers to the best interest rate they offer, or at least inform them when one is available.

Almost all respondents to our survey said they would like to see these measures implemented. Savings account holder Sharon is one of those who supports the proposal to require banks to let customers know when they could be getting a better deal.

"I think they should definitely be communicating to their customers as to what new rates are available and what better accounts are available," she explains.

It's shocking that banks target their most loyal customers, especially older Australians, with a loyalty tax

Patrick Veyret, CHOICE head of policy and government relations

Sharon says she feels banks aren't doing anything to encourage depositors to stick with them in the long term, observing "they don't really tend to reward loyalty at all".

"It just comes back to making you feel valued as a customer. If they're highlighting: hey, you can make more money this way. Or, thanks very much for being such a long-time member of ours, here, have an extra 0.1%."

Veyret says long-time customers are often missing out on better rates and that the provision recommended by CHOICE would help mitigate this.

"It's shocking that banks target their most loyal customers, especially older Australians, with a loyalty tax," he says. "Banks need to do better by the community and, as a starting point, should be legally required to switch people to the best rate they offer."

Banks should make it easier to close an account

Third among CHOICE's major recommendations is an initiative to break down barriers to switching banks. We think that banks should have to make it as easy for consumers to close a deposit account as it is to open one.

Veyret says banks are intentionally adding "friction" to the process of cancelling a savings account, with CHOICE hearing from consumers who had to go to great lengths to take their business to a new lender.

"We've heard that some people can only close an account if they go to a bank branch, which is becoming increasingly rare, or face hours waiting on hold to speak to a staff member," he says. "The solution is simple: it should be as easy to close an account as it is to open it."

The Australian Banking Association responds

In a statement to CHOICE, the Australian Banking Association (ABA), which represents most major lenders, says it supports a well-regulated banking sector and notes lenders are already subject to regulations governing how their products are designed and distributed.

The ABA also says accounts with the best rates won't suit all customers and while digital banking is "streamlining" the process of opening and closing accounts, "rigorous" verification measures are still needed to fight fraud.

The ACCC will hand down its recommendations to the federal government in December.

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