The Reserve Bank raised its cash rate target to 4.85% on 3 November 2026, effective 4 November—its highest level since November 2008. That puts more pressure on mortgage holders and household budgets across Australia.
But there’s another side to higher interest rates. For savers and people holding cash in bank accounts, higher rates can present an opportunity to earn more interest on their money.
If you’ve got money sitting in a savings account, emergency fund or cash you’ve put aside for a future goal, now is a good time to check what interest you’re earning.
The catch? Not all savings accounts are created equal.
There are plenty of banks competing for your savings, and you might have already come across names like ING, ubank, Macquarie, Rabobank, Bankwest, AMP Bank and Judo Bank. So, which one should you choose?
The answer isn’t necessarily the bank advertising the highest interest rate. It comes down to the rate on offer, the conditions you need to meet and whether the account suits how you use your money. And you need to read the fine print!
Here are my top tips for getting the best return on your cash.
1. Is a bank account the right option for you?
Before comparing savings accounts, think about why you’re holding cash and when you’ll need it.
Money in a bank account can provide security, flexibility and easy access when you need it. There are plenty of reasons to hold cash, including:
- Emergency fund: Ideally, three to six months of living expenses set aside for unexpected costs.
- Short-term savings goals: Saving for a holiday, car, home deposit or another expense in the next few years.
- Retirement buffer: Keeping a cash reserve to cover living expenses in the early years of retirement, particularly if you want to avoid selling investments during a market downturn.
- Upcoming expenses: Money you’ve set aside for a major purchase or an expected change in circumstances.
But if you have more money than you need (a great problem to have!), a bank account might not be the best place for all of it.
Depending on your goals and timeframe, investing some of that money could be more appropriate.
Remember, inflation gradually reduces the purchasing power of your money. Even if you’re earning interest, cash might not deliver the long-term growth you’re looking for.
The key is to match where you keep your money with when you’ll need it.
2. Don’t just look at the advertised interest rate
The first thing you’ll probably notice when comparing savings accounts is the interest rate.
But it’s important to understand how that rate is made up. Moneysmart’s savings account guide is a useful starting point. There are generally three types of rates you’ll come across:
- Base interest rate: The standard rate paid on your savings without needing to meet additional conditions.
- Bonus interest rate: Extra interest you can earn by meeting certain requirements, such as making regular deposits or growing your balance.
- Introductory interest rate: A higher rate offered for a limited period, often to attract new customers.
The advertised rate might look fantastic, but what happens when the introductory offer ends or you don’t meet the bonus conditions?
3. Read the terms and conditions (yes, actually read them!)
I know, reading bank terms and conditions isn’t everyone’s idea of a good time. But this is where the important details often sit.
Before opening an account, check:
- How long does the advertised interest rate last?
- What does the rate revert to afterwards?
- Do you need to deposit a minimum amount each month?
- Does your balance need to increase every month?
- Are withdrawals allowed?
- Do you need to make a certain number of transactions using a linked everyday account?
- Is there a maximum balance eligible for the advertised rate?
- Are there account fees?
- Do you need to open another transaction account with the bank?
Pay particular attention to what happens if you miss a condition.
Some accounts pay a much lower base rate if you don’t meet the monthly requirements, meaning one withdrawal or missed deposit could cost you a chunk of interest.
How savings account conditions can catch you out
Let’s look at a few examples.
Example 1: You need to grow your balance
An account might require you to increase your savings balance by at least $100 each month to qualify for bonus interest.
But what happens if you need to withdraw $500 for an unexpected expense?
You might miss out on the bonus interest for that month, even if you have plenty of money in the account overall.
Example 2: You need to make regular deposits
Another account might require you to deposit at least $500 every month.
That could work well if you’re regularly putting money aside from your salary. But if you’ve already saved a lump sum and aren’t adding much more, you might struggle to meet the conditions.
Example 3: The introductory rate disappears
You open an account offering a very attractive rate for four or five months. Once that period ends, the interest rate drops considerably.
If you don’t review the account, you could find yourself earning much less than you expected.
4. Automate your savings conditions
Automation is your best friend when it comes to managing money.
If your savings account requires you to deposit a certain amount each month to qualify for bonus interest, set up an automatic transfer from your everyday account.
Don’t rely on remembering to do it each month.
Likewise, if you’ve signed up for an introductory rate that expires after four or five months, put a reminder in your calendar to review the account before the rate drops.
5. Remember, more interest means more tax
One thing people sometimes forget when comparing savings accounts is the tax.
Interest earned on your savings is generally treated as assessable income and needs to be included in your tax return.
For example, if you have $50,000 in a savings account earning 5% p.a., that’s approximately $2,500 in interest over a year, assuming the balance and rate stay the same.
That interest is added to your other taxable income and taxed at your marginal tax rate.
Also, make sure your bank has your tax file number (TFN), or an applicable exemption. If you don’t provide one, the bank may be required to withhold tax from your interest at the highest marginal tax rate. You can claim a credit for any tax withheld when you lodge your return.
And remember, paying tax isn’t a bad thing. It means you’ve earned income!
My final tip: Done is better than perfect
One of my favourite sayings is that done is better than perfect.
Yes, it’s great if you’re someone who has the time and energy to regularly shop around, compare interest rates and move your money to whichever bank is offering the best deal.
But if you know that’s not something you have the capacity for right now, don’t let perfect get in the way of making a good decision.
Do your research, compare a few rates and even talk to your current bank to see what they can offer.
If your current bank has an option with a slightly lower rate but conditions that suit you, and you can finally tick this task off your list, that might be a perfectly good outcome. Don’t beat yourself up because you aren’t earning the absolute highest rate in the market.
The goal isn’t to spend every weekend chasing an extra 0.10% in interest. It’s to make sure your money is working as hard as it reasonably can, without creating another job for yourself.
