‘Flush with cash’: Bank cuts kids’ rate on popular account
Commonwealth Bank has taken a knife to its kids' deposit accounts by further shaving the savings rate on the banking product most commonly associated with its school Dollarmites program.
The country's largest bank has cut 10 basis points off its Youthsaver account, bringing the maximum savings rate to 1.1 per cent.
Banks were forced to trim savings rates after the Reserve Bank of Australia issued emergency rate cuts in response to the coronavirus, bringing the official cash rate to 0.25 per cent.
Higher savings rates in a low-interest environment are more expensive for a bank to maintain, as interest earned off loans is less effective in paying out savings returns.
RateCity research director Sally Tindall said the rate hack to the kids' savings account by CBA was "disappointing", and schools should be teaching students the importance of shopping around.
"Hundreds of thousands of kids around the country will, once again, be earning less interest on their money," she said.
"I hope schools supporting the Dollarmites program point this out to their classrooms."
CBA has also carved five basis points from both its standard NetBank Saver and conditional GoalSaver accounts.
The NetBank Saver now has a five-month introductory rate of 0.95 per cent before reverting to an ongoing rate of 0.05 per cent.
Its conditional savings account has a maximum rate of 0.5 per cent if $200 is deposited every month and no withdrawals are made.
Figures from RateCity shows CBA clipped its youth savings account more than its adult counterparts since emergency rates cut in March.
CBA has slashed the Dollarmites account three times, bringing the total shaving to 45 basis points, while the standard NetBank account has been cut by 35 basis points and its adult conditional saver has been shaved of 15 basis points.
According to banking data from the Australian Prudential Regulation Authority, CBA has the highest level of household deposits.
"The bank is flush with people's cash right now, which means they simply can't afford to pay a decent rate of return to savers, particularly when home loan rates are at record lows," Ms Tindall said.
Compared to the other three major banks in Australia, CBA has the lowest savings rates on conditional deposit accounts, while ANZ has the lowest standard savings account at 0.8 per cent.
Out of the big four, Westpac is offering the highest conditional and standard savings rates. The bank is also offering people under the age of 30 a lucrative conditional rate of 3 per cent if the account balance grows every month.
Australian Unity is offering the highest ongoing savings rate at 1.75 per cent if $250 is deposited into the account every month and no withdrawals are made.
Originally published as 'Flush with cash': Why bank has cut kids' rate