Honeymoon & conditional deposit rates: Are you earning what you think?

The following is general information and not financial advice or recommendation to take any action. 

Many banks across Australia frequently advertise introductory or conditional deposit interest rates to attract new customers.

Beyond the appeal of these early rates, lies a trap many Australians fall into: you may not be earning as much interest as you think.

What are honeymoon deposit rates?

Honeymoon deposit rates are temporary, promotional interest rates usually offered to new customers. They look attractive, often significantly higher than the most bank account rates but typically last only a few months. After this, the account reverts to a much lower ongoing rate, often without clear notification.

For example, a bank might offer 4.5% p.a interest for the first four months, then drop it to 1.2% p.a thereafter. If you’re not actively monitoring your account, you could go months or years earning minimal interest, thinking you’re still on a high rate.

Banks usually effect this by promoting an all-in rate consisting of a low base rate plus a higher bonus rate, with the bonus rate reducing to zero after a few months, leaving the customer on the low base rate.

What are conditional deposit rates?

Savings customers also get caught out with conditional deposit rates.

Once again banks market a high total rate with the total rate generally consisting of a low base rate, plus a higher bonus rate.

The bonus rate component is only paid upon the customer meeting certain criteria, such as making a certain number of card transactions in the month, depositing a minimum amount, making no withdrawals, etc.

Some of these conditions are hard to meet and they're generally really hard to monitor. The banks don't usually show customers their progress meeting these conditions during the month, so many customers forget about them altogether. Customers then fail to meet the conditions and are disqualified earning the bonus rate component.  

Effort vs Reward

Chasing honeymoon or conditional rates means constantly switching banks, updating debits, diarising and monitoring deposit or card navigating conditions, as well as navigating new apps and systems.

Beyond reading fine print, to help, you can set calendar reminders at the end of a honeymoon period reassess your account and move money if needed, and to check if you've met conditions as the end of a month approaches.

For many savers, this effort outweighs the gains, they still fail to meet the conditions imposed, and run out of banks offering new customer honeymoon rates.

How Earnr can help

As former banking leaders, we've heard these frustrations from savers time and time and again.

Earnr has been built from the ground up, to help savers. Our range of accounts don't have honeymoon bonuses or monthly hoops and conditions you need to jump through.

We pride ourselves on offering clear transparent rates, and the Earnr App and website access will always show you exactly what rate you've been earning.

Remember, Earnr is not a bank, and to always read the product documents for the account type you're interested in.

If you want to know more, have a look at the account types section on our website, or get in touch with an Earnr Account Specialist here.

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‍The information in this article is intended to be factual though may also contain the opinion of the author. Whilst every effort has been made to ensure accuracy, we take no responsibility for any errors or omissions. Any opinions are those of the author alone and not a recommendation to take any action or obtain any product. You should consider whether this information is appropriate for you, and seek professional advice before making any decisions.