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You want a savings account with a great interest rate – is there a catch?

You have great savings goals and want to invest your money well. As tempting as it is to go straight for the highest interest rate, there could be drawbacks you need to be aware of.

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Money Manager

  • Finance
  • Read Time: 6 mins

National Seniors Money Manager account 

The National Seniors Money Manager account pays interest on every dollar you deposit, and your money is there whenever you need it.  

With no monthly fees, and access to your available balance online or via a Visa Debit Card, National Seniors Money Manager account offers you a flexible savings account anytime, anywhere.

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No matter what stage you are in life and what goals you are setting, you’ll want to make the most of your savings. The closer you are to retiring, or even if you have already retired, the more interest you may have in making your money work for you.

However, it can be hard to make sense of all the savings account deals being offered and what their enticing interest rates really mean.

Savings account providers are offering significantly higher interest rates than they have for the past few years due to recent interest rate rises. However, some come with some pretty tricky fine points and conditions you’ll need to meet to earn that shiny interest rate. Here’s what to look out for.

Comparing accounts

You’ll want to choose the type of savings account that will work best for your individual circumstances. There are three main types of savings accounts offering different interest rate conditions: bonus rate accounts, introductory rate accounts, and no strings accounts.

  • Bonus rate account. This highly competitive type of account combines a base rate and a bonus rate to create the maximum rate available. There are, however, sizeable conditions to meet, such as making a minimum monthly deposit. If you don’t meet these qualifiers, you may find your interest rate will drop substantially. So, you’ll need to be sure you can meet the conditions even when times are tough.

  • Introductory rate account. With this type of account, a higher interest rate is offered for a short time once you open the account and then it reverts to a standard interest rate. This is known as an introductory or honeymoon rate. You’ll need to be aware of the rate your account will revert to and compare that against other account types. This type of account can be a good option for those who only intend to keep their money in a savings account for a short period of time.

  • No strings account. As the name suggests, these accounts have no strings attached and are an ideal “set and forget” option. They typically offer a slightly lower interest rate than bonus rate accounts but are a handy way to increase your balance with little thought and effort. This type of account is ideal for individuals who want certainty about their interest rates.

What's a good rate?

It’s often not the interest rate itself, but the ability to earn it that will determine which is the best choice for you. You will need to shop around and compare savings account interest rates but be sure always to read the terms and conditions. Things to check when evaluating accounts and checking the fine print include:

  • How long will the advertised interest rate last? Is it introductory only, conditional to minimum deposit or spending rules, or will it have no strings attached?

  • Will the interest rate be reduced on balances over a certain threshold? In some cases, interest may be withheld.

  • Are hidden fees attached? Be aware of how much you may be charged – and why. This might offset the attractive interest rate on offer.

Picking the right savings account for you

This depends on the amount you wish to invest, for how long, and for what reason.

  • Bonus rate accounts may be a better choice for people who want to benefit from a higher interest rate and know they can meet the minimum criteria to achieve it. The downside is, if you don’t meet the criteria your interest rate is likely to be considerably reduced.
  • Introductory rates may be a good choice for those who are only intending to keep the account open for a short time to take advantage of the higher introductory rate. However, once it reverts to the standard rate, the interest earned over the long term with this style of account could be less than a bonus rate or no strings attached account.
  • No strings accounts are ideal for those who want a consistent interest rate without any attached spending or deposit conditions. You can spend and/or save your money as you see fit without it affecting your interest rate.

Some questions to ask yourself include:  

  • Are you intending to invest your savings for a shorter period or longer period? If it is longer, then a no strings account or bonus rate account may provide you with higher returns over the longer term than an introductory account.

  • Does your income or spending habits fluctuate? If they are inconsistent, then a bonus rate account may not be the best choice, as you could risk having your interest rate cut if you fail to meet the minimum conditions.

  • Do you prefer the simplicity of a set-and-forget style account? Or are you happy to monitor your account balance and spending to ensure you’re meeting minimum conditions in exchange for a potentially higher rate?

Remember, it’s not always the account with the highest interest rate that will be the best for you and your circumstances. The key is to review savings accounts regularly and make the switch to a different provider and/or account type if it’s no longer meeting your needs.  

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. 


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