Savings Product Review: Online savings accounts

Wednesday 1st February 2006

What's it called and what sort of a savings product is it?
Online savings accounts.

Who is the company behind it?
One of the biggest trends in the savings market this year has been the online savings accounts that are being offered by ANZ, ASB, SuperBank. Westpac, Bank Direct and UDC.

Who is the target market?
These accounts are the modern day savings account for everyday use.

What return does it offer?
Currently the rates start at 6.80%, and are rising. In the past week a number of banks have hiked the rates on their online savings rates following the Reserve Bank's official cash rate increase. The highest in the market is SuperBank at 7.15%. Rates are displayed at www.depositrates.co.nz

When was it launched?
SuperBank launched the first online savings account in 2003.
What other products are they like or do they compete with?
Online savings accounts are really the new age term deposits.

Is it long term, short term or medium term?
These are on-call accounts so they can be used for short-term savings, however one of their attractions is that interest is compounded monthly. This can make a substantial difference to the actual interest earned, particularly for longer terms and larger deposits.

What is the unique selling point?
One thing in particular; Rate, rate, rate. However they also offer simplicity and no account maintenance or transaction fees.

How strong a stomach do you need for it? (in other words, what's the risk profile?)
Online savings accounts are really a bread and butter savings product. A basic staple without too strong a flavour.

What's the hitch?
The only downside to these products is the limited access and restrictions on transactions (each one has slightly different restrictions). However they are savings accounts for accumulation, not transactional day-to-day accounts.

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