Is your savings account interest rate really as good as you think it is?

New Zealanders are warned to check they're being paid the interest rate they think they are in their savings accounts.

Many banks offer "bonus" interest rates on savings accounts, if people meet certain criteria, such as making a deposit each month or not withdrawing money.

For example, ANZ offers 1.55 percent interest, if people make no withdrawals, and deposit $20 or more a month into their Serious Saver account. Otherwise, they earn 0.05 percent.

ASB offers 1.6 percent to people who do not make withdrawals from its Savings Plus or 0.05 percent if they do.

Kiwibank said there was a risk the accounts were not delivering the value their headline rates suggested.

"When life doesn't run exactly to plan, those bonus rates can fall away surprisingly easily," Kiwibank chief customer officer retail Mark Stephen said.

"A single unexpected expense can mean the bonus disappears for the month, leaving savers earning a very low base rate instead."

He said this could significantly reduce the actual return households received, particularly when household budgets were already under pressure.

"The conflict in the Middle East is a clear example of how global events can quickly feed into costs here at home. When uncertainty increases, we value predictability.

"Savings accounts are meant to provide that, but the structure of some products can undermine it."

He said the problem was the design of the products, not customer behaviour.

"Savers don't miss out on bonus interest, because they're careless. They miss out because real life doesn't always align with rigid conditions set by your bank.

"When savings products rely on people behaving perfectly every month, value naturally shifts away from customers to the banks.

"If you stand back and think, why would you have an online call-type savings product? You want a fair return on your funds when you don't require them, but you also require your funds to be absolutely accessible when you need them.

"We've just taken a very simple approach and a fair return, absolutely accessible, but the rate that's quoted is the rate that you earn, regardless of whether you are accessing those savings constantly."

He said there was a risk that the product design of bonus saver accounts benefited the bank rather than the customer.

"Our stance is very much to be simple by design, fair and transparent, so an easy-to-understand, easy-to-use product. How it's described is exactly what it does and the rate of interest that we quote is the market rate, and that's exactly what the customer gets."

Squirrel chief executive David Cunningham, who was previously chief executive of The Co-operative Bank, said BNZ and Kiwibank were the only banks not offering bonus accounts.

"If you look at the base interest rate, if you don't do the required task, it's hopeless. It's gaming the customer."

He said the accounts were initially designed with the intention of encouraging saving.

"I was around when we launched those about 25 years ago. The reason they were launched was because research said, 'Hey, reward me when I save and I do what I say'.

"At that time, interest rates were around 12-13 percent. It was structured as, 'We'll pay 11 percent and give people a 1.5 percent bonus, if they make a regular deposit'.

"Over time, it became, 'Pay them bugger all, unless they do what they're required and that makes the bank make more money'."

He said his experience was that about half the customers in the accounts would get the bonus rate, but about 80 percent of the funds by value.

"People with more money in there are more conscious of making the deposit."

ASB said its bonus saver account encouraged more disciplined saving by rewarding customers who made limited, fee-free withdrawals with higher interest.

"Interest rates are cyclical, and move up or down, depending on where we are in the cycle. In this environment, we actively encourage customers to review whether their savings are working as hard as they could be.

"For customers with larger balances in on-call and savings accounts, we pro-actively reach out to suggest alternatives, such as term deposits or other higher-interest options that may better suit their circumstances.

"In the past 12 months, we've contacted more than 190,000 customers to encourage them to consider higher interest-bearing alternatives and make their money work harder for them."

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