Why Kiwis leave $120 billion stagnating in low-interest savings accounts
Many New Zealanders are keeping billions in low-interest savings accounts despite better options being available. With nearly $120 billion sitting in such news, banks continue to profit from minimal payouts. Some savers, however, prioritise easy access and stability over higher returns.
A recent look at savings rates shows how little some accounts pay. ANZ's Select account offers just 0.05% interest on balances over $5,000. Westpac's Simple Saver matches this rate, while ASB's Savings On Call pays slightly more at 0.1%. Co-Operative's Smile On Call also gives 0.1%, but only on amounts above $4,000.
The average unconditional savings rate in New Zealand sits just over 1%, though some accounts drop as low as 0.05%. In contrast, overseas options like Bank Austria's Sparkonto fix PLUS provided a 2% rate for six months on new deposits in 2023. Yet many Kiwis still favour accounts with easy access, particularly older savers who value rate stability.
Lower-income earners often choose convenience over higher returns. This preference helps banks maintain a steady income stream from underperforming accounts.
With $120 billion in savings earning minimal interest, New Zealanders face a clear trade-off. While some accounts offer slightly better rates, many still opt for accessibility and predictability. Banks, meanwhile, benefit from the billions parked in low-yielding products.
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