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Best bank accounts

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by Peter Switzer

One of the challenges of being a so-called money guru is that people actually believe it and they set tasks that should only be reserved for those who are superhuman. These thoughts became obvious as I tried to work through the quagmire that is the matrix of comparable bank accounts in this country.

Why was I doing this in the first place, given how hard it is? Well, my colleagues on the Vega breakfast program in Sydney — Tony Squires, Rebecca Wilson and Mikey Robins — simply requested I find the best bank accounts in Australia.

Differing demands

That, of course, is easier said than done. And part of the problem is that different Aussies have different demands when it comes to their bank accounts. Some are big transactors while others hardly use ATMs and Eftpos facilities. Others want high interest rates while others want a big access to cash. Meanwhile, some like to link their bank account to their home loan to reduce the principal they pay back and to enjoy the tax benefits of an offset account.

Simply, the task is a complex one.

To cater to mainstream Australia, I broke the job down into different sorts of accounts and used the hardworking researchers at RateCity.com.au to give me a leg up.

The transaction account

The first and most important bank account to get right is your transaction account, especially if you are a high transactor.

In order of cost and delivery of an expected service, the ratings experts nominated the Bankwest Hero Transaction Account as the best, followed by the ANZ access account, NAB Classic Account, the Suncorp Bank Everyday options and finally the Citibank Cash Management Account.

These accounts will let you transact electronically at a really negligible cost. They suit a high transactor who prefers a wider range of transaction types such as branch, ATM, cheque, phone and internet. It’s based on an average of 35 transactions per month.

What do you want?

The idea is to work out what services you really want. Low cost can bring low service, but by looking at the best you can find they might offer exactly what you want.

On the other hand, the ratings team looked at what they call the ‘Full Service Low Transactor’ who wants what they call a five star treatment.

Of these the lowest cost performers, Unicom Access Account was the cheapest by a country mile. This was followed by Select Credit Union and the NAB Classic Banking Account.

These accounts will cost you a little more, but they let you transact how you like, including branch access.

The savings account

After nailing the best transaction account, you might want to go for the best savings account and it would be ideal if they were at the same bank. However, if you are a good online banker, it could simply be a transfer operation when the transaction balance gets higher than it needs to be. By the way, you should work out what the working balance is for running your weekly or monthly life and when the balances creep above what is needed, you should transfer to a higher yielding account.

So, what are the top-rating accounts?

Number one was the Westpac Reward Saver paying 4.7 per cent. This was followed by the Bankwest Smart eSaver offering 4.5 per cent. This was tracked by the St George Directsaver Account (4.5 per cent), NAB iSaver (4.4 per cent) and the ANZ Online Saver (4.25 per cent). By the way, these rates are based on a minimum balance of $5,000.

For those who want the best rated online savings accounts, the St George Directsaver Account and the NAB iSaver were the top two.

The fixed or term deposit

For those who want to slam a big pot of money into a fixed or term deposit, the best ones tend to be non-mainstream financial institutions such as Investec (4.45 per cent), Heritage Building Society (4.35 per cent), Macquarie (4.35 per cent) and Citibank (4.2 per cent). This is for 90-days on a balance of $50,000, but if you want to give up your dough for a year, Investec is offering 5.2 per cent. There’s a benchmark for comparing to others out there.

Customer attraction

Standing back and looking at the information, it’s apparent that Bankwest is making a special effort to attract customers. It topped the best transaction accounts and came in at number two position for the best savings account.

Also, the NAB Classic Account figured in a number of the top rating tables and might be worth looking at to benchmark any account you are thinking about.

Planning, planning, planning

I reckon if you’ve never been organised with your money, it might be time to change all of that by getting your transaction and savings accounts right. I often tell business owners that are looking for direction to grow their businesses that most business owners don’t plan to fail, they fail to plan!

The same rule applies to getting the business of your money life in order.

Also, once you’ve worked out what bank account works, check out a credit union account for comparison.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Published on: Friday, August 07, 2009