“Virgin Money is here to make all Australians better off. Today we’re launching the first in a range of new products starting with two credit cards and an online savings account – all of which are best in class. There is no better time to offer Australians a genuine alternative with simple and fairly priced banking products in an industry where there’s less competition today than ever before. This is classic Virgin territory,”

“Yes, Australia steered itself superbly through the Global Financial Crisis, but unfortunately this came at a price: the elimination of genuine choice. The finance sector in Australia has become highly consolidated and is now dominated by the Big Four, which results in the average Aussie getting less choice.”

Yawn. The second time around the gloss or the shine of Sir Richard’s Virgin brand seems to have become a little tarnished. I mean all the words are there, the sexy young things are there and the fantastic deals are there. Whoa back up there a minute, the fantastic deals? Hmm might check the detail a bit later on that one.

For those that aren’t too old you might recall a similar launch of a Virgin credit card in 2003. Remember it came in a choice of 5 colours and had one corner rounded to make sure you knew they were different? The last Virgin credit card was issued in April 2008. Apparently it wasn’t profitable so Virgin cancelled the card and the 500,000 plus card holders were forced to either accept the replacement card offered by Westpac (Westpac Ignite) or go elsewhere.

Sir Richard says there’s less competition in the market today. Well duh, when the going got tough, you left sport! You might also recall you sold your old Virgin customers to Westpac?

Why did Virgin leave and will they leave again?

The original products were essentially Virgin badged Westpac products. The original agreement with Westpac ran for 5 years, at the end of which Virgin accepted a short term deal whereby they sold ownership of the customers to Westpac. Valued customers? Too right, you were valued at $39 million or about $78 each. The main reason for leaving would appear to be the lack of profits and the end of that agreement.

The latest products are backed by Citibank under a 10 year deal. You should be worth at least $150 at the end of that deal. Let’s hope at the end of that agreement the card is profitable and a new ongoing agreement is put in place in good time before it comes to an end.

Low Rate and No Annual Fee Credit Cards

The biggest selling point of the Virgin No Annual Fee Credit Card is of course the no annual fee. However, if you actually do use it and rollover any outstanding balances from month to month then despite the lack of an annual fee your fees will add up pretty fast by virtue of the ordinary interest rate.

* This is the Westpac credit card to which the old Virgin credit card holders were transferred when Virgin quit the credit card market in Australia in 2008. Unfortunately, it is not open to new applications.

No Annual Fee Credit Cards

If you do really want a no annual fee credit card then there are other offerings from outside the big four banks, despite what Virgin would have you believe.

Airline Credit Cards

Virgin’s main competitor in the airline market is Jetstar. Let’s compare the two offerings and a Velocity card from NAB.

Whoa on the face of it the Jetstar credit card gives the Virgin a flogging. The interest rate, annual fee, interest free days and balance transfer offer are all better on the Jetstar card.

Pink Credit Card

Unfortunately Virgin isn’t offering a pink credit card option this time around. However, you can have a pink credit card thanks to NAB Low Rate Visa.

Savings Accounts

Aha at last some clear sky for Virgin. The Virgin Savings Account, Virgin Saver beats all of the Big 4 banks with their offering based on interest rates. Just to be sure lets take a closer look. Yep all four of the big banks have inferior promotional and standard interest rates. If it wasn’t for NAB owning UBank, Virgin Money could claim this round too. Whilst Virgin are offering a promotional interest rate that is similar to the interest rate on home loans (a clearly unsustainable strategy), the UBank standard rate is clearly superior.

Conclusion

Now I like Sir Richard, even if he is a Pom nice Englishman and takes his profits overseas, it’s rare to hear him whinge. I reckon, if you invited him over for a BBQ, he’d bring some nice looking people for a swinging good time. However, if you want good value from your financial products have a look around before buying this tired old Virgin marketing exercise thats been around the blocks before.

Disclaimer: Financial product details such as interest rates and fees change without notice. Please confirm all details with the product provider before taking any action. If you need advice you would be wise to consult a Financial Planner.

Citibank vs HSBC
Australian travellers are ubiquitous around the world which is not surprising with almost 40% of us born or having family ties overseas and being natural explorers it is almost a right of passage to adulthood, to go exploring around the world. To facilitate access to funds whilst your away from home it is a good idea to have access to banking facilities that will firstly be available and secondly easy to use. Two of the world’s largest banking groups, Citibank and HSBC, have Australian offshoots and specialise in cross border banking services. We compare what banking facilities they have to offer Aussies who are playing, home or away.

Bank Products and Services

Premium Services
Premium services are offered by both companies with access dependent upon having a certain level of funds or loans with that company. Membership to either gives you access to a ‘relationship manager’ who will purportedly give you better service. Discounts, waived fees and preferential pricing are common benefits.

Citibank Citigold
Requirements: minimum deposits or investments with Citibank of at least A$100,000

Members of Citigold get a Relationship Manager, who is a combination investment adviser and banker who will ‘proactively pursue the right financial solutions for you’. They act as your central point of contact with the bank and can seek further advice from internal investment, mortgage or treasury consultants if required. Regular reviews of your financial situation are an included benefit.

Along with access to the full suite of Citibank products you will be eligible for discounts on annual credit card fees for the Platinum Credit Card, reduced fees on certain mortgage products, preferential pricing on Term Deposits, 50% discount on Financial Planning Plan preparation fee, discounts of up to 45% on various insurance products and preferential rates on Foreign Exchange transactions.

Other services include; worldwide Citigold Emergency Healthcare Service, Citigold Global Banking, Seminars, regular updates on investments and research.

HSBC Premier
Requirements: minimum of $500,000 in total loans or $200,000 in HSBC deposits or investments or a combination of the two. You must also maintain a HSBC Premier Cash Management Account.

You get a HSBC Premier Relationship Manager who is ‘dedicated to helping you meet your financial goals’. As well as having access to the HSBC Premier Financial Planning service, members get preferential pricing, discounts or fees waived on a number of services or products including; mortgages, deposit products, stockbroking and bank charges.

If you would like to visit the ski resort of Hotham at Mount Hotham in the Victorian ski fields then you can take advantage of HSBC’s exclusive Snow Holiday deals.

Foreign Currency Accounts
Both Citibank and HSBC offer Dual Currency Accounts and Multi Currency Accounts.

Credit Cards

For brevity we have only compared the lowest rate credit cards. For more information click the links below.

• Compare Citibank Credit Cards
• Compare HSBC Credit Cards

Savings Accounts

Name	Interest Rate
Citibank Online Saver	6.35% pa intro rate (6 mths) then 5.25% pa
HSBC Serious Saver	5.00% pa for every month you don’t withdraw

Interest on Bank Accounts

The Treasurer outlined a 50% tax discount on the first $1,000 of interest earned. This gives potential savings of $75 for those on a marginal rate of 15% and $225 for those on the top marginal rate of 45%. This change is expected to come into force from 1 July 2011 and is to apply to interest bearing deposits with authorised deposit taking institutions which includes bank accounts, term deposits, bonds, annuities and debentures.

First Home Saver Account Changes

Previously if you held a First Home Saver Account (FHSA) and purchased a new home before the end of the qualifying period of 4 years then the account proceeds would have been compulsorily transferred to your superannuation account. The nominated changes will now see the funds go into your eligible mortgage at the end of the four year qualifying period.

Superannuation

Superannuation Co-contribution

The matching by the Government of personal super contributions was to increase from 1 July 2012 to $1,250 and again at 1 July 2014 to $1,500. Now it will remain at $1,000. Furthermore the thresholds on which the co-contributions are based will be frozen for the next two years. The current threshold under which you could receive the maximum co-contribution is $31,920 with the fade out threshold $61,920.

New Concessions for Superannuation Guarantee Contributions

The Government has indicated that in will effectively remove the contributions tax on normal employer superannuation contributions for workers on incomes up to $37,000 from 1 July 2012. The contributions tax on the current 9% super contribution for someone on an income of $37,000 is approximately $500.

12 per cent Superannuation Guarantee

The Government has indicated that it will legislate to increase the superannuation guarantee, from the current 9% to 12%, incrementally by 0.5% pa from 1 July 2013 until 2019/20.

Increase in eligibility for compulsory Superannuation Contributions to age 75

From 1 July 2013 the maximum threshold for compulsory superannuation contributions will be lifted to 75 years.

Superannuation Concessional Cap

The concessional cap on superannuation contributions for individuals over 49 years of age and with less than $500,000 in super will be lifted to $50,000 pa from 1 July 2012.

Tax

Simple Treatment of Work Related Expenses

From the 2012-13 financial year tax payers will provide have a choice of a $500 standard deduction to replace deductions for their work related expenses and cost of managing tax affairs. This is slated to increase to $1,000 in 2013-14.

For those with more complex needs they will be able to continue to claim expenses by the current methods.

Low Income Earner Tax Offset (LITO)

The Low Income Earner Tax Offset will be increased to $1,500 with a $30,000 fade out threshold. This means that a individual earning less than $16,000 or a recipient of a superannuation pension of $48,158 should pay no tax.

Senior Australian Tax Offset (SATO)

The maximum a senior Australian can earn before paying tax or the Medicare levy will now be $30,685 for singles and $26,680 for members of a couple.

Child Care Rebate

The annual Child Care Rebate is to be dropped from the current $7,778 to $7,500 with indexation suspended for the next 4 years.

For more details visit the Government Budget website

Previously there was a four year waiting period before the First Home Saver Account (FHSA) could be used to help purchase a new home. If you did buy a home within this time period then the balance of the FHSA would be compulsorily transferred to your superannuation account.

The proposed changes will enable the accumulated account balance at the end of the the four year period to be paid into an eligible mortgage. So if you purchase a home within the 4 year qualifying period you have to wait to the end of it before the funds can be released into your new mortgage.

Budget Overview

Compare FHSAs

Two of the major expenses in most household budgets are groceries and petrol. With Australia’s two largest grocery store chains, Coles and Woolworths both offering a credit card with a rewards program and linked petrol savings programs, we take a look at whether getting one of these cards might be a good idea.

Both cards are similar in a number of aspects namely they are not low interest cards and they both offer rewards programs with petrol discounts.

Petrol Discount Programs

Coles Group – Coles Express service stations

When you shop at Coles Group stores and spend more than $30 you will receive a docket at the checkout which contains a Fuel Discount Receipt with a discount of 4 cents per litre. If you also use your Coles Group Source MasterCard you will also be sent via mail with your monthly statement a “Source Fuel Voucher”. You can earn up to four of these each month. The Source Fuel Voucher gives you an additional discount of 4 cents per litre. So when you combine the two of these discounts you can get up to 8 cents per litre discount at Shell Service Stations.

Fuel Discount Receipt (4c) + Source Fuel Voucher (4c) = 8 cents discount

Note that you only qualify for the credit card discount vouchers at Coles, Bi-Lo or Liquorland stores and not Coles Express, Coles online, Liquorland Direct or Kmart. The credit card fuel voucher must be used in conjunction with a ordinary fuel discount receipt and they do have an expiry date. The maximum amount of fuel you can get a discount on is 150 litres at a time.

Woolworths – Caltex Woolworths/Safeway Service Stations

Spend $30 or more at a Woolworths store and you will receive a 4 cents per litre discount Fuel Offer voucher on the docket at the checkout. At the checkout when you present your Everyday Rewards Card the discount voucher details are loaded onto the card. Multiple vouchers can be loaded onto the card and when you redeem them the highest value discount voucher is used first and then the next oldest voucher (one closest to expiry). Vouchers expire after 28 days. You can login online and check voucher details.

To gain an extra 4 cents discount you must spend $5 or more on goods (not tobacco or gift cards) inside the Caltex Woolworths / Caltex Safeway store.

You can link your Everyday Rewards card to the Everyday Money credit card and you will then automatically receive the fuel savings when you pay both with the epump and at the checkout. “epump” is a credit card swipe and pay system exclusive to the Woolworths Everyday Money credit card located on the petrol bowser at most Caltex Woolworths / Caltex Safeway service stations. To use it, you simply hold the Woolworths credit card near the indicated spot on the bowser and then enter your four digit PIN. You must do this first before using the bowser otherwise you will have to pay inside.  Fuel purchased at Caltex service stations using the Everyday Money credit card earn 2 points for every dollar spent.

• Spend more the $30 in Woolies and get the fuel voucher.
• Ditch the dockets – present your Everyday Rewards card and get the voucher entered on to the card.
• Spend more than $5 inside the Caltex Service station to get a further 4 cent discount.
• Link your Everyday Rewards card to your Everyday Money credit card.
• Use the Everyday Money credit card to pay via the epump facility on the bowser to save time by not having to queue inside the servo.

Petrol Savings In Perspective

With petrol savings from 4 cents to 8 cents from both companies, how much could you expect to save? How much petrol do you normally use?

Rewards Programs

Coles – FlyBuys

FlyBuys is the rewards program operated by the Coles Group. It is open to anybody and you can earn 2 points for every $5 spent at Coles Supermarkets, Bi-Lo Supermarkets, KMart, Target, Liquorland, Jetset and Travelworld. At Coles Express stores you can earn 1 point per $5 spent. Whilst at Budget Car Rental the rate is 2 points per $1 spent and at Best Western Australia 1 point per dollar spent.

By using the Coles Group Source MasterCard holders you can earn an additional 2 FlyBuys points per $5 spent.

For example if you spend $200 per week at a Coles supermarket and use your Coles Group Source MasterCard you would earn 160 points.

A $20 FlyBuys Gift Card can be redeemed for 2,500 points. This would take just under 16 weeks to achieve at this spending level.

2,500 points = $20 FlyBuys Gift Card

You can use the points to get Gift Cards (for use at Coles Group companies from $20) as well as a very large range of other goods for the household, entertainment and you can also donate to a number of worthwhile charities (Red Cross, Cancer Council and The Smith Family).

FlyBuys points expire after 3 years.

Woolworths – Everyday Rewards

The rewards for accumulating points with the Everyday Money credit card are shopping gift cards which can be used at Woolies and associated stores.

The points accumulated depend upon what and where you purchase with incentives for shopping at Woolies and purchasing their Select brand.

You get:

3 points for every dollar spent on the Woolies Select products. The Select brand is Woolies premium house brand.
2 points for every dollar spent on non Select Brand products at Woolies / Safeways, epump and associated stores.
1 point for every dollar of purchases on goods at places other than Woolies.

Every 4 months Woolies will send you a shopping card if you have accumulated enough points. The minimum value card they will send out is a $20 shopping card which requires 3,448 points.

If you spend $3,448 over 4 months or $198.92 per week on your card at places other than Woolies you will accumulate 3,448 points over 4 months – this will get you a $20 shopping card ($60 pa).

If you spend $198.92 per week on your card at Woolies, then you would accumulate 6,896 points over 4 months – which will gain you a $40 shopping card ($120 pa).

If you spent 20% of your weekly spend of $198.92 on Woolies Select Brand and the rest on any other brand at Woolies then you would accumulate 7,241 points – $44 ($132 pa).

Woolworths Everyday Money Credit Card

Woolies has two “rewards programs”.  The first is called Everyday Rewards and is essentially a loyalty card with the major benefit that you can link the 4 cent fuel savings voucher to it (by presenting it at the checkout) and therefore don’t need to carry around lots of ratty dockets. It has recently connected to the Qantas Frequent Flyer (QFF) program. You can join the Qantas Frequent Flyer program without paying the normal $82.50 joining fee if you join via Everyday Rewards. You earn QFF points on every dollar over the initial $30 purchase amount (conditions apply).

The second rewards program is attached to the Everyday Money credit card which rewards you with Shopping Cards which can be used at Woolies group stores. The points are tallied every 4 months with the shopping cards sent out via mail. The Everyday Money credit card also allows you to pay for petrol at the pump at Caltex petrol stations instead of having to go to the counter and queue up. It automatically takes into account any fuel discount previously added to your Everyday Rewards card. This is a time saver for those in a hurry although to gain a further 4 cent petrol discount you will need to go into the store and purchase $5 worth of items and pay at the counter.

In the first year the annual fee is $0 but then reverts to $49 per annum.

If you spend around $200 each week in Woolies then you could expect to earn a shopping card of about $40 every 4 months ($120 per year).

If you use about 30 litres of fuel per week and religiously get the full 8 cent discount you could potentially reduce your fuel cost per annum by about $120.

Coles Group Source MasterCard

Coles offer the FlyBuys rewards program which allows you to redeem points for a very wide range of goods. Using the Coles Group Source MasterCard at the same time effectively doubles the rewards points you can accumulate. Whilst the amount of money needed to be spent to get enough points to get a $20 gift card is greater than the Woolies reward program the range of rewards if very large. You can also redeem points for contributions to charities. The credit card also has no annual fee compared to an annual fee of $49 after the first year for the Woolies credit card.

Summary

As straight out credit cards both have high rates of interest and if you do not pay back the full outstanding balance each month then a low interest credit card would probably be a better option. However if you do make full repayments each month and usually spend $200 or more per week at either of these stores then you can benefit from using one of these cards. The major reasons for having these cards are the petrol savings and the credit card reward programs.

Both rewards programs have an option to redeem points for gift cards. The amount of money you need to spend at each of the respective stores using their respective credit cards in order to get a $20 gift card is $1,724 from Woolies and $3,125 from Coles. Whilst the rewards are restricted to gift cards with Woolies, the Coles FlyBuys program has an extensive range of items for which you can redeem your points.

You need to factor in the cost of the annual credit card fee. The Coles Group Source MasterCard has no annual fee whereas the Woolworths Everyday Money card has an annual fee of $49 which is waived for the first year.

Whether these credit cards are worth getting is totally dependant on your individual situation. You need to do the sums and work out how much you normally spend at these stores and on petrol and then work out what the benefits could mean for you.

Warning: Financial product features can change without notice. Please confirm all details with the product provider before taking any action.

Given the recent trend of home loan interest rate rises, many home owners may be considering switching to a fixed rate home loan. Home owners are facing a similar situation as they did approaching the Federal elections in 2007. At that time the mortgage rates increased rapidly and many opted to switch to a fixed rate loan only to see the RBA rapidly cut rates due to the global financial crisis. Many borrowers who did fix were left with monthly repayments substantially higher than variable rate repayments. Now the RBA is trying to fight inflation, house pricing bubbles and bring rates up from historically low rates so interest rates are on the rise.

Home Loan Standard Variable Rates vs 3 Year Fixed Rates

Variable vs Fixed Rate Home Loans

This graph shows the average standard variable home loan interest rate and average 3 year fixed home loan interest rate from 1990. The movement of both these rates closely track the cash rate which is determined by the RBA. Sometimes the variable rate leads the change in direction and sometimes the reverse is true. Picking where rates will be in the future is impossible but it gives you a good idea of how fast rates can change.

The big issue is that fixing your mortgage is a gamble. It’s a massive gamble on the direction of variable interest rates. You need to consider why you are doing it and what are the possible outcomes if you do. Put simply you can either win or lose but depending on your circumstances it is not always cut and dried.

Why Switch to a Fixed Rate Mortgage

Fixing your interest rate gives you the knowledge that you repayments won’t change for the period they are fixed. If your repayments are a large part of your income then this could give you peace of mind. Sure you could lose out by paying more than you might have needed to but you can rest assured you will still own your home at the end of that period (assuming other variables don’t change). If making the monthly repayments is a worry and a 2% to 3% or even 5% increase in rates will see you lose your home then this might be something to consider.

Downside to Fixing to a Fixed Rate Mortgage

• Miss out on lower interest rates
• Break fees if you switch out
• New loan fees

Alternatives Options to Fixing your Home Loan

Consider a no frills basic home loan. No frills basic home loans typically are around half a percent lower than standard variable rate home loans. They don’t always have the extra features of the standard variable rate loans but you should consider if the extra features are really needed. There are many no frills basic home loans that have redraw and offset accounts which will suit many borrowers.

Fix a portion of your loan. You can take an each way bet by fixing part of your home loan.

Fees to consider

Termination Fees – Most banks will charge you a fee for terminating a home loan within a certain time period commonly 5 years. In most cases this is payable even if you are switching to a new loan with the same lender.

Break Fees – Most mortgage lenders have what are called break fees. If you are changing from a fixed interest loan where the interest rate is higher than the variable rate then depending upon the size of the loan then this can easily run into tens of thousands of dollars. When the interest rate of the fixed loan is below the variable loan then you may not have to pay a break fee. In the first example the lender is losing money in the second they are making money hence the difference. You will need to do a cost benefit analysis to work out whether it is a good idea to switch. Weigh up the break fees and other costs versus the interest savings on your monthly repayments over the time period left on your fixed loan.

You also need to factor in the costs of the new loan. This is not a comprehensive list of issues to consider and it is a complex issue best dealt with by professionals. Please take advice from your financial adviser before taking any action.

For help choosing a suitable loan you might consider using a Mortgage Broker. Most mortgage brokers will be able to find out what your needs are with respect to features and then find the best one from a large panel of lenders.

Disclaimer: Switching loans is a complex issue. You should always take advice from a professional before undertaking any action as it may lead to large financial losses.

Having a bank account will help children learn:

• the concept of interest
• understanding fees
• savings goal setting
• reading a bank statement
• interacting with the bank – making deposits and withdrawals via phone, online or in person

This article provides a run down on some of the childrens savings accounts available from the major institutions.

Childrens Bank Account Summary Table

Warning

Before you start you should be aware that children have special tax rates (see ATO website) and if you are considering trying to “save tax” by holding large amounts of money in your child’s name then you would be in danger of attracting undue attention from the ATO. The ATO is well aware of this issue and you would not the first to think of doing it. Banks routinely report all transactions of a large size to the ATO. If you do want to save tax then there may be better options open to you. It all starts with your goal. If you want to starting a savings plan with the intention of funding education costs, a house deposit or even funding their retirement needs then there are specific tax enhanced savings vehicles probably more suited to these needs (eg: Savings Bonds, and Superannuation). If any of these are your intentions it would be wise to see a financial planner.

Tax Issues

Some issues you need to be aware of when it comes to tax on childrens savings accounts are best answered by the ATO including:

Does a child have to quote a tax file number (TFN)?

Who declares interest earned by the child’s savings account?

Does the child need to lodge a tax return?

Childrens Savings Account Details

ANZ Progress Saver

For children under 12 years of age ANZ require the account to be opened in the name of an adult in trust for the child. The Progress Saver account offers bonus interest if you deposit $10 or more and have no withdrawals or debits each month.

The standard interest rate is 0.01% with bonus interest of 4.25%.

Other features include:

• Minimum opening and ongoing balance $10
• No monthly account service fee.
• You can deposit cash directly into your account through branches
• You can track saving progress with a savings graph on each statement.
• Automatic savings plan
• Receive one free ANZ Transaction as defined in the ANZ Personal Banking Account Fees and Charges (PDF 324kB) booklet

Commonwealth Bank Youthsaver Account

The CBA Youthsaver account is suitable for children under 18 years of age. It offers standard interest of 0.01% with bonus interest of 4.00% if you make one deposit and no withdrawals each calendar month.

Other features:

• No monthly account fee
• No withdrawal fees when you use Commonwealth Bank ATMs and branches
• Primary school students can bank at school if their school participates in the Commonwealth Bank School Banking program.

The Commonwealth Bank run the well known Dollarmites Club program with a dedicated website with games, activities, downloads as well as material for parents.

NAB Smart Junior Saver

The NAB Smart Junior Saver is for children under 18 years. It offers a standard interest rate of 1.00% with bonus interest of 3.00% payable when at least one deposit and no withdrawals are made each month.

Other highlights include:

• A free money box
• No minimum or opening balance requirements
• No transaction or account keeping fees while they are under 18 years old
• Quarterly statements with a savings graph to monitor your progress
• Access at any NAB branch, or through NAB Internet Banking or NAB Telephone Banking

Westpac Kids Reward Saver / Westpac Youth Reward Saver

Westpac has two childrens accounts, the Kids Reward Saver for children under 12 and the Youth Reward Saver for those under 21.

They offer a standard interest rate of 0.75% with bonus interest of 3.40% if you make a deposit and no withdrawals each month. They also offer a special incentive of extra interest for new accounts opened between 9 March 2010 and 11 April 2010 of 1.55% for 4 months. Total interest if you meet these requirements is 5.70%.

Both have similar features including:

• No monthly service fee
• Free withdrawals each month (when a withdrawal is made the standard bonus interest rate won’t apply)
• Deposits into the account can be made by visiting a branch or via Online Banking by providing the BSB and account number.
• Monthly statements

Bankwest

Bankwest have two childrens savings accounts one is a transaction account and the other is a high interest savings account. The transaction account is a requirement before you can open the high interest savings account.

Bankwest Children’s Savings Account

This account has a tiered interest schedule:

• balances less than $5,000 the interest is 0.25%
• balances of $5,000 to $10,000 the interest is 1.25%, and
• for balances greater than $10,000 the interest is 2.25%.

Features include:

• Suitable for children under 15
• No monthly fees
• It can be linked to the Bankwest Kids’ Bonus Saver

Bankwest Kids’ Bonus Saver

This account pays a whopping 7% bonus interest when deposits of $25 to $250 are made each month and no withdrawals are made. There are also no account fees and access can be made by the parent or guardian via phone or online.

St George Incentive Saver Account

This account is open to all children of any age. It offers standard interest of 0.01% with tiered bonus interest. For amounts from $1 to $50,000, the bonus interest is 1.50%, while amounts greater than $50,000, attract a bonus rate of 2.50%.

To gain the bonus interest at least one deposit and no withdrawals have to be made each month.

For children under age 13 St George offer membership to their Happy Dragon Club with access to special games, puzzles and other educational material and you can download colouring-in sheets to keep them occupied.

For parents they offer some tips and lessons to help children learn good money habits and these six simple money lessons explaining what money concepts kids can understand at their various developmental stages.

Suncorp Kids Savings Account

The Suncorp Kids Savings Account offers standard interest of 1.25% and bonus interest of 3.75% for every month where a deposit of $20 or more is made with no more than one withdrawal.

The account features include:

• No monthly account keeping fee
• No Suncorp Bank transaction fees
• Monthly statements with a savings graph to track progress

Suncorp also has a childrens website called Suncorp Kids, which provides educational material for for children including goal setting, worksheets and games as well as information for parents.

Alternatives Options for Older Children

ING Direct Savings Maximiser

Whilst not specifically for children the ING Direct Savings Maximiser allows children as young as 13 years to open an account. The Savings Maximiser is a popular online high interest savings account that pays a standard interest of 4.50% with new accounts currently an extra 1.35% for 4 months.

It features:

• No monthly fees
• A high standard interest rate
• Does not require any regular monthly deposits, and
• Has no minimum balance

Disclaimer: Product features including interest rates change without notice. Please check all details with the product provider before taking any action. It is highly recommended that you consult a tax adviser before starting any of these types of accounts as there may be unintended taxation consequences due to the different taxation rules for minors (children under the age of 18).

There are a quite a few variations on the eligibility to qualify for these bonuses so please check the details carefully before making any decision. Common qualifications include:

• minimum monthly deposit amount
• restrictions on making withdrawals (ie if you withdraw funds then you don’t qualify)
• maximum account balance
• transaction account with same bank

Most have a minimum amount you need to deposit each month and may also have restrictions on whether you can actually withdraw funds and still qualify for the bonus interest. Only products that have an incentive for regular monthly deposits have been listed. Many of the banks have other savings accounts that actually have higher interest rates even taking into consideration the bonus rates so if you want to open an account with your favourite bank check their other products first.

There are two products that standout from the rest, Bankwest’s Regular Saver and UBank’s USaver. The Bankwest product has the higher interest rate but has a fair number of requirements in that you need to deposit between $50 and $500 per month, link it to an eligible Bankwest transaction account and and if you make a withdrawal you get nil interest. The maximum opening balance is also just $500. The USaver product on the other hand only requires you to initiate an Automatic Savings Plan for at least $100 per month and has a maximum eligible balance of $150,000. USaver’s bonus rate of 0.10% isn’t huge but when added to the standard rate of 5.85% it is.

Things to Consider

Many of the products considered had an overall interest rate less than other high interest savings accounts with the same bank.

If you are saving for a home deposit and have never purchased a home before then you might be better off considering (FHSA) where the Government contributes 17% of what you contribute each year on the first $5,000.

Whilst most of the accounts require you to be 18 or over some like the Bankwest Regular Saver allows younger account holders. If you are under 18 years of age you need to consider the taxation consequences of your earnings as minors have special tax rates. If you are a parent you might consider the alternative of opening an account in trust for your child if the earnings are going to be significant. Also, if you are married, you might also consider who is paying a lower rate of tax on interest income. Obviously you need to consult your tax adviser or financial planner to get qualified advice in these matters.

All interest rates were correct at time of publication. Please check with product providers to confirm before making any decision.

Disclaimer: Product interest rates and features change without notice. Please check with the product provider before making any decision and consult your financial planner if you require advice.

Citibank Online Saver is continuing to push for attention by keeping their rate just above their competitors – 5.88% up from 5.71%.

ING Direct Savings Maximiser seem to have locked horns with their main opposition UBank USaver as both have increased their rate to 5.85%, up from 5.60% and 5.62% respectively.

RaboPlus passed on the full increase with their Premium Saver account next with a creditable 5.75% up from 5.50%.

Suncorp eOptions have maintained their 12 month eOption sub account flexirate of 6.45% (read term deposit) with the ordinary rate up 0.25% to 4.25%.

The Bad Guys

The Big Four Banks a have all blown us a raspberry with no change as have Bankwest, HSBC and St George.

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Disclaimer: Rates can change daily. Many savings account providers only offer these high rates to new accounts or have other restrictions. Before taking any action please confirm all details including whether you qualify with the savings account provider.

You can contribute up to $5,000 each year into these accounts and the government will kick in an additional 17%. Add on top of that the interest earned and your going to be well on your way to saving for that deposit.

There are rules associated with the accounts, which you can read here [First Home Saver Account Guide], but if you are already putting savings away and don’t have one then you are missing out.

Not all banks offer and the interest rates vary but the current offering from ME Bank has a very high interest rate. Evern higher than most ordinary savings accounts.

ME Bank’s First Home Saver currently has an interest rate of 6.25% pa. There are no monthly fees to worry about either.

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Disclaimer: Interest rates and features change without notice, please check all details before making any decision and seek advice from a Financial Planner.