If you have a "bonus" savings account that rewards you with extra interest if you meet the conditions each month, now is the time to reassess whether it's working for you.
A few years ago, Commonwealth Bank's popular Goalsaver account offered a base rate – what you receive if you don't meet the conditions – of 3 per cent, representing half the maximum interest rate of a princely 6 per cent.
If you failed to deposit the minimum amount or breached the withdrawal limit, the penalty wasn't too harsh. You still received something.
But as the Reserve Bank slashes the cash rate and interest rates tumble, the base rate for some "bonus" accounts has hit rock bottom.
Goalsaver now offers a base rate of 0.01 per cent.
Now when life intervenes and, for example, emergency funds need to be withdrawn, account holders suffer a "steep" and "brutal" penalty.
Personal finance experts say now is the time to review past statements and see how many times you've missed out on the bonus interest, reassess your savings goals, and consider other bank accounts.
"On any given month you might need to access your money, and forfeiting an entire month's interest is a steep penalty," says Nicole Pedersen-McKinnon from The Money Mentor Way.
"I don't think you should have one unless the base rate is at least half the maximum rate."
Some incentive accounts that fit the bill include RaboDirect's PremiumSaver, which offers a base rate of 0.9 per cent and a bonus rate of 1.65 per cent, and Rams' Saver, which pays 1.5 per cent and 1.65 per cent.
The Rams deal is a far cry from what it offered four years ago, when the base rate was a whopping 4.75 per cent, representing four-fifths of the maximum rate.
Sean Hourigan, 26, from north Bondi, has ING Direct's Savings Maximiser, whose base rate represents two-thirds of the maximum rate of 2.75 per cent.
Since changing careers and becoming an apprentice carpenter, he hasn't been able to fulfil the conditions of depositing more than $1000 a month, but the reasonable base rate has seen him continue using the account.
"The whole point of these accounts is to not touch the money and let it grow, and it's definitely helped me save," Hourigan says.
The worst "bonus" deals are found at the big banks. Three of the four – Commonwealth Bank, ANZ and Westpac – are offering a base rate of 0.01 per cent, while NAB is offering 0.5 per cent.
Official action
In Britain, the Financial Conduct Authority recently named and shamed the worst savings accounts, including ones with conditional, "bonus" rates.
Big names, such as HSBC, First Direct and the Post Office, were slammed for offering accounts that pay 0 per cent interest.
"While these interest rates do not represent the best rates available in the market, they continue to demonstrate that when comparing the lowest rate offered by providers of these products, some consumers could be better off by opening a different account," the regulator says.
Consumer advocate Christopher Zinn says the Australian Securities and Investments Commission should consider carrying out a similar study and naming and shaming the worst savings options.
"Words like 'bonus' and 'reward' give this impression that you're easily saving, but if it can't pay more than 1 per cent [on the month you can't meet the conditions], it's hardly worth having," he says.
A survey by financial research group Canstar, commissioned by Fairfax Media, revealed a growth in the number of savings accounts with a bonus rate in the past four years.
At present, there are 16 savings accounts with a base rate of 0.01 per cent. Fourteen come with a condition of no withdrawals to achieve the bonus. Two allow just one withdrawal each month.
In 2012, the average base rate for "bonus" savings accounts was 1.01 per cent. This has since fallen to 0.46 per cent.
Accounts with a base rate of 0.01 per cent have an average conditional bonus rate of 2.20 per cent.
"You need to look for a healthy base rate and continually review the variable interest rate, because people enter arrangements with the best intentions but situations do change," Canstar analyst Mitchell Watson says.
"The penalty of missing interest is severe. These accounts are for someone who is disciplined and able to lock away money."
Make the move
These "bonus" accounts can be extremely attractive if you need an incentive to keep saving for that car, renovation or holiday.
But if you were initially enticed by the high, combined interest rate and your financial circumstances have changed, it may be wise to consider other savings accounts where you don't risk a penalty.
"People should be seriously engaging with their savings," says David Liston from OurGo, the youth-focused arm of One Big Switch. "Don't ignore it and assume savings just happen.
"Shop around and make sure you're getting as much out of your savings as you can in an account you can afford."
There is certainly a place for bonus savings accounts in the market.
"[We] strongly support Australia having a savings culture, something we seem to have had a couple of generations ago, but in the frenzy of easy credit and marketing, have forgotten," Financial Counselling Australia's Fiona Guthrie says.
"The idea of 'incentive' interest rates is a good one to encourage this."
Esther Han is the consumer affairs editor for the Sydney Morning Herald. Connect with her on Facebook at Savvy Consumer or follow Fairfax Money.
