Cash must rock, not roll

‘Set and forget’ is the line of least resistance when it comes to savings accounts, but just letting your cash roll over could be costing you income, writes Sophie Elsworth

SAVERS with cash stashed in the bank have been hit by falling rates in recent years and there’s no sign of upwards swings anytime soon.

Those hit hardest by the dismal cash returns include retirees who rely on fixed-term deposits. Long gone are the returns of 6 per cent or so that were enjoyed five years ago – now deposit holders in many cases are lucky to get even half that.

Financial institutions rely heavily on savers to “set and forget” their fixed deposits, and come renewal time if customers fail to take action their cash will simply roll over into another term, often at a much lower rate than they were getting before.

New data from financial comparison website InfoChoice has found that on a $10,000 deposit the average interest rate for a three-month term is 2.29 per cent, for six months it’s 2.41 per cent and for 12 months it’s 2.62 per cent.

Despite the low rates, deposit holders must take a proactive approach to trying to snare a competitive deal, according to the site’s spokeswoman, Laura Crowden.

“It’s important to regularly shop around and be willing to move your money to get the highest rates available,” she says.

“Although many providers have eased back on some of the term deposit rates they raised just a few months ago, there are still plenty of term deposit products paying more than bonus rates available through savings accounts.” Last month the nation’s largest lender, the Commonwealth Bank, quietly chopped some of its term deposit rates – only two months after it boasted that it had lifted the rates for its savings customers. John Edginton, the chief executive officer of term deposit marketplace Cashwerkz, says customers have to monitor the market regularly to get a clear understanding of what rates are competitive.

“Definitely look at terms of up to 12 months. Any term for six or 12 months you should be able to get around 2.95 to 3 per cent at the top end,” he says.

“There are some specials that occasionally pop up with some of the banks, but they tend to be fairly isolated.”

He encourages savers to use financial comparison sites to check what rates are available and to also consider some of the deals available through smaller banks.