What is a notice saver account?

Notice saver accounts are a fairly new product to the Australian savings account scene. They’re a handy hybrid of term deposits and on-call savings accounts. You can keep your money locked away if you want, just like you would in a term deposit or you can access it without penalties, as long as you’re prepared to wait out the period of notice. This offers you quite a lot of flexibility compared to term deposits.

How do notice savers work?

If your notice saver is for your own personal use then you can decide how long you want your notice period to be. In Australia, the banks offer 31 day, 60 day and 90 day accounts.

You’ll find that the interest rates increase with the length of the notice period. Once the funds are in, if you want to get to your money, you need to give your bank the required amount of notice.

It’s not instant, but you can access your money by a predictable date without paying any penalties.

Comparing notice savings accounts

Each notice saver account will have its own unique features that will make it particularly attractive (or not) to you, so you need to hit up a comparison site and see what stands out to you. Here’s what you need to look at:

The notification term

This is one of the biggest factors to look at, as it determines how easily you can get to your money, as well as what your rate of interest will be.

While most banks offer three choices – 31, 60 and 90 days, AMP Bank only offers a 31-day notice period on the AMP Notice account which has a current interest rate of 1.80 per cent pa. For comparison, Rabobank’s 90-day notice option offers 2.20 per cent.

The interest rates

Your interest rate is also vitally important, as it determines how much your money will grow by. If you’re looking to save quickly, you’ll need to choose the longer periods (unless you go with AMP).

Make sure you can add to your balance

One of the main downsides to term deposits is that they don’t let you add to the balance once the initial deposit is in. With notice savers, you can add as much as you like, which helps your savings to grow even more.

Are you a business customer?

Westpac offers a notice saver that’s just for businesses, so they can make their surplus cash work harder for them. This account offers businesses the 31, 60 and 90 day notice periods, as well as interest rates of 1.90 per cent, 1.95 per cent and 2.0 per cent. It’s a specialised account with a more complex structure than retail options, so you may need more advice before opening it.

How the interest is calculated

You need to see how often interest is calculated, because if it’s calculated daily then you’ll get the most benefit, especially if the interest is paid out or deposited back into your account monthly. Calculating daily means that compound interest has more to work on each day as it takes into account the principal and the interest that’s already been earned.

If you’re really looking for a good interest rate (of course you are), you could do worse than the ANZ advance notice saver account. This is actually a term deposit, so you don’t have the flexibility of being able to add to the principal, but you’ll earn 1.90 per cent pa currently for a five month term. When you compare this to a 90-day notice period, it’s not a bad deal. Find out how much interest you could earn using our compound interest calculator.

Can you link the notice saver to your regular transaction account?

Most saving accounts need a transaction account to be linked to it so money can be transferred between them. Some banks will let you use your existing account even if it’s with another provider, but some will want you to open an account with them and link it to the saver.

The pros and cons of notice saving accounts

The upsides

Good interest rates

Most notice savers offer you better rates of interest than you’ll get with regular at–call savings accounts. Do remember, though, that the RBA is looking to cut the cash rate further soon.

You can add money to your principal amount

You can add extra funds to your principal whenever you like, something you can’t do with a term deposit. You can even set up regular deposits from your transaction account.

You have more flexibility

You have more agility than with a term deposit – if you want to move the money to another account with a higher interest rate then you don’t have to wait any more than 90 days. Some term deposits lock you in for years.

The downsides

You’re still locked in a little; if you need your money in a hurry you still have to wait a minimum of 31 days. If there’s an emergency, you may have to accept penalty fees.

The interest rates are variable

Unlike term deposits, which have a fixed interest rate for the entire term, a variable rate can drop. Of course, it can also rise, but not so much in the current climate.

What you need to think about before opening an account

You need to think about a few things before making your choice.

Falling interest rates

If you have longer term savings plans then a term deposit may be better because your money will grow at the same rate no matter what the cash rate is. The cash rate does fluctuate over two or three years.

Being left without ready funds during an emergency

If something is really urgent then your bank may agree to release some funds early, but you’ll probably be penalised. If you worry about being left without enough contingency funds then you might want to keep some of your savings separately in an at-call account.

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.