Wednesday, November 24, 2010

Asking for higher interest rates on my funds

I've been dumping spare funds into my 'high' interest saving account. The funds that I'm saving to buy an investment property have been dumped into the CBA Netbank Saver account. My 6% high interest deal with my bank was going to expire on 30th November this year so it was time for a friendly call to my bank with the usual request:
"Hi, the special high interest rate on my account is about to expire soon. I've just checked your website and you've got a new and higher interest rate on offer. Can you increase the interest rate on my Netbank Saver account to 6.25% as offered on your website?"
The lady on the phone says, "Sure, I can increase the rates on both your accounts for you today."

Mind you, the wording on their website is a deterrent to people like myself (click on the image I've attached if you're too lazy). They specify that the higher interest rates are for new account holders only. This is untrue and all the major banks will match your rates to their introductory rates (these are on offer all year round) if you ask so just ignore their wordings and make your request.

If I didn't ask for higher rates, I'd be getting the usual 4.75 %pa just like millions of other depositors. So I'll happily demand the 6.25% pa rate. Considering the interest is paid monthly, the annual effective rate is actually higher than 6.25% pa.

That's an extra 1.5%pa in interest and that's a huge gap. The more funds you have, the more you're missing out on. Why should they pay me 4.75% for my funds only to lend it out at 11% or 24% to someone else for their personal/credit card loans? Gimme some of that profit :p Just some rough numbers for you below, ignoring the fact that the interest is paid monthly so I haven't accounted for the compounding effect. I've just used simple interest as if interest is paid annually:

* $1000, @4.75%pa= $47.50, @6.25%pa= $62.50, an extra $15 interest per year
*$10,000, @4.75%pa= $475, @6.25%pa= $625, an extra $150 interest per year
*$50,000, @4.75%pa= $2,375, @6.25%pa= $3,125, an extra $750 interest per year
*$100,000, @4.75%pa interest=$4,750, @6.25pa interest=$6250, an extra $1,500 per year
I could always stash the funds into some shares for higher returns but I don't want to expose the capital to any volatility. Plus, I don't expect the savings to be sitting in the Netbank Saver account for an eternity. Once there's enough there, I'm going shopping to buy some bricks and mortar.

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