Types of Australian savings account

Start from the timing

Transaction accounts

The everyday account your salary lands in and your card draws from. Australian transaction accounts generally pay little or no interest, and that is fine — this is a spending account, not a savings one.

What to check is fees. Many accounts waive the monthly fee if a minimum amount is deposited each month; others have no fee at all. Also check ATM fees, and foreign transaction fees if you travel.

Savings accounts

Where money you are not spending should sit. Most pay a base rate plus a conditional bonus rate — see high-interest savings accounts for how those conditions work and why they matter more than the headline.

The condition that most often causes trouble is "no withdrawals in the month". An account with that condition is a poor home for an emergency fund, because using the fund costs you the bonus in the month you can least afford it. Some people keep two: one accessible account for emergencies, one bonus account for goal saving.

Term deposits

Lock a sum for a fixed term at a fixed rate. Terms run from a month to five years.

Breaking a term deposit early is generally possible but costs you — typically a reduction in the interest rate applied, and usually a notice period. Check both before assuming the money is reachable.

Term deposits suit money with a date attached: a car in eighteen months, a planned expense next year. Match the term to the date. Check what happens at maturity — many roll over automatically into a new term at the prevailing rate, which may not be competitive.

Offset accounts

If you have a home loan, this is usually the answer.

An offset account is a transaction account linked to your mortgage. The balance is subtracted from the loan balance before interest is calculated, so $20,000 sitting in offset against a $500,000 loan means you are charged interest on $480,000.

The benefit is a reduction in interest charged, not interest earned. That distinction matters because there is no income, so nothing to declare and nothing to tax.

Compare properly: a savings account paying 5% taxed at your marginal rate delivers materially less than 5% after tax. An offset against a 6% mortgage delivers 6% with no tax at all. For most people with a mortgage, the offset wins clearly.

Check whether your loan actually has a full offset facility, whether it costs extra, and whether it applies to the whole balance. Partial offsets exist and behave differently.

Before you open anything

1. Check it is an ADI and understand the Financial Claims Scheme cap — remember it applies per licence, not per brand.
2. Read the bonus conditions, not the headline rate.
3. Give the bank your TFN, or tax may be withheld from your interest at the top rate.
4. Check the fees, particularly monthly account fees on transaction accounts.
5. Clear expensive debt first. No savings account pays what a credit card charges.