Have you opened a savings account in your bank to secure your funds? However, not every savings account in Australia is the same. Most people are confused by terms like term, bonus, and high-interest savings. You cannot choose the right type of account without understanding these terms.

Some Australians have a short-term goal, while others want to build an emergency fund. Thus, you need to determine your goal before creating the savings account. Read the blog to know the key features of different types of bank savings accounts.

High-Interest Savings Account – Pros and Cons

Many banks allow you to open a high-yield savings account that will grow your wealth faster. The interest rate is substantially higher than normal savings account.

Those with short-term goals can create this account for an emergency fund. The fee for this type of account is also comparatively low.

Pros

• Easy access to the fund
• Competitive base interest rate
• Predictable earnings
• An insured account – Protect your principal
• High liquidity – Withdraw money at any time

Cons

• Risk of fluctuation in the interest rate
• Need a minimum balance.

Bonus Savings Account

Many banks allow you to open bonus-interest accounts where interest is higher. Safety and liquidity are the key advantages of creating a bonus savings account. The additional ‘bonus’ interest rate will help you earn more, but you need to meet some conditions.

For instance, you may need to deposit a minimum amount every month and make no withdrawals. It is also essential to maintain a minimum balance for this account.

Pros

• No risk of loss, unlike other investments
• A safe place to secure your emergency fund
• Access to funds

Cons

• Less flexibility with your withdrawals
• Missing conditions lead to the loss of bonus interest.
• Restrictive for your unpredictable costs

Term Savings Account

Term savings accounts refer to the fixed deposits created in banks. FD accounts allow you to lock the fund for a particular period. You will receive a higher interest rate on this type of account. Besides, a safe and fixed return is a key advantage of having a fixed deposit account.

Pros

• Guaranteed returns due to the locked interest rate
• Higher interest rate
• Low-risk investment
• Encourage discipline in saving your money.
• Interest paid out periodically – Predictable income

Cons

• Penalties for withdrawing the fund prematurely
• Lack of liquidity
• Not perfect for your emergency fund

Which Type of Savings Account Should You Choose?

The choice of the type of savings account varies with your financial habits and goals. Those who value flexibility should open a high-interest account. But, to stay disciplined and receive higher returns, go for a bonus savings account. On the contrary, a fixed deposit account is intended for those who prefer long-term savings and stability.

Banks in Australia lets you open different types of bank savings accounts. But, you will get various types of facilities depending on the type of account created. Accessibility and the speed of growing your fund also vary with the account. Determine your savings strategy to reach the financial goal. You may contact the bank’s customer representatives to learn more details.