Online accounts fudging 'high' interest rates

AUSTRALIANS rushing to put their savings in heavily promoted ''high interest'' online savings accounts may not be getting the interest rate kick they are led to believe by the industry's glossy brochures, with after-tax returns from many online accounts failing to keep up with inflation, new figures show.

The average interest rate paid on online savers, once promotional offers are excluded, has slipped to 2.53 per cent, according to financial researchers at Canstar.

Although consumers can get significantly higher ''bonus'' rates if they make regular contributions or do not make withdrawals, the figures highlight the low ''base rates'' paid on online saving accounts where people are not benefiting from promotional or bonus offers.

When income taxes and the Medicare levy are taken into account, the analysis found the average online savings rate was paying a return of less than 2 per cent. This compares with the latest inflation rate of 2.2 per cent.

''Any investors who pay tax are going backwards on their cash investments, unless they're earning an above-average return,'' Canstar's head of product and strategy, Steve Mickenbecker, said.


Topics:  banks interest rates

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