The best Bank for your Buck
Choosing a bank is an important decision, and there are many options out there. It’s important to do your research first to see what suits you and think about what your goals are. Do you want to grow your savings quickly, or create a specific savings fund for an event in the distant future? Do you need a loan to buy your first house? Are you looking for a conservative KiwiSaver fund, or are you willing to take a risk?
There are some great financial resources available online, such as Canstar, which provides information about financial products, from home loans to bank accounts. You can also a look at Interest.co.nz for more comparisons between banks, and Sorted.co.nz for general financial information.
Here is a quick look at some of the factors you might like to think over before making your choice.
Savings accounts
These accounts keep your money safe and earn you interest. Most banks have a variety of accounts available providing you with incentives to save. Unfortunately, the best interest rates come with some restrictions. Banks often discourage you from making withdrawals, and it may be impossible to transfer your money out at short notice.
Among the best savings accounts in terms of interest rates are Notice Savings accounts: you can withdraw your money, but you must give your bank advance warning. Examples are:
Kiwibank’s Notice Saver (90 days’ notice) 1% per annum. Minimum deposit is $2000. Kiwibank also has a 32 days’ notice option, which also has a minimum deposit amount of $2000. Interest rate is 0.4% per annum.
Westpac Notice Savings (32 days’ notice) 0.4% per annum. There is no minimum investment amount
Other popular savings accounts available through major banks include:
Kiwibank’s Fast Forward Saver – up to 0.25% per annum. The base rate is 0.05%, and you get 0.2% more if you deposit at least $20 per month and make no withdrawals. If you do need to get money out, you get one free withdrawal per month.
ANZ Serious Saver – up to 0.2% per annum. You get the best rate of interest if you deposit at least $20 per month into your account and make no withdrawals. If you do need to get money out, you get one free withdrawal per month.
ASB Savings Plus- up to 0.15% per annum. You receive the full reward if you make only one withdrawal at the start of each calendar quarter. Your interest rates drop down if you make more than one withdrawal.
BNZ Rapid Save - 0.15% per annum. One free withdrawal every month, and after that your withdrawals come with a small fee.
Westpac Bonus Saver up to 0.15% per annum. Base rate is 0.05%, and you get 1% more if your bank account at the end of each business month is $20 higher than it was at the end of the last month. Withdrawals are free and unlimited.
You can use resources like the Canstar website to check which savings account is best for you, depending on the amount of money you want to invest. Canstar can also be used to compare your bank’s options against one another.
Always read the terms and conditions to make sure you understand what happens when you decide to transfer money out of your savings account.
Term deposits
Term deposits are another way to grow your savings: your money is locked away for a specified period of time, so interest can accrue. Term deposits are not suitable for everyone: while savings accounts don’t always have a minimum amount you need to deposit, term deposits do, usually starting at several thousand dollars. Be conscious that you will not be able to withdraw your money in this time. Here’s a quick comparison of major New Zealand banks and what they offer:
Westpac offers term deposits on investments from $5000. Invest for six months, nine months, or a year, and grow your savings by 0.8%, 1% or 1.2% per annum respectively. The minimum length of time you can invest is 30 days, and the maximum is five years, and the total range of interest you can earn varies from 0.15% to 2%.
ASB also has a term deposit option for sums of more than $5000. Interest on these sums varies from 0.15% per annum to 2.15%. The timeframe in which you can invest varies from 30 days, to five years, and the longer you invest for the more interest you earn.
ANZ has a term deposit option for sums of money of more than $10,000. Timeframes vary from 30 days, to 5 years, and interest rates vary from 0.3% to 2.10% depending on the timeframe and amount you have invested.
BNZ allows you to invest sums as low as $2000 in a term deposit. Interest ranges from 0.15% per annum to 2% per annum. Investment timeframes can range between a week and five years.
Kiwibank allows clients to invest sums from $1000. Interest rates range from 0.05% to 1.8% depending on the amount you invest, and the length of time you choose to invest. The maximum amount you can invest is $50,000 and the maximum length of time is 5 years.
Mortgages
Getting a mortgage is probably the biggest financial decision you’ll ever make, so make sure you look around for the best deal. Banks usually have a mortgage adviser available to talk through your options, and it’s highly recommended you also talk to your accountant! People who are purchasing a house as an investment property rather than building or buying their first home will often pay a higher interest rate.
Interest structures vary, and commonly involved either fixed or floating interest rates or a combination of the two. If a loan has a fixed interest, it remains static for specified time. After that time elapses you can either continue with another fixed term or choose another option. Floating loan interest rates go up and down, depending on the market. As an indication of the amount of interest you might expect to pay, Westpac, ASB, ANZ and BNZ all have featured home loans with 2.55% per annum being the lowest advertised rate. There are other interest structures available such as offset home loans: this feature is offered by Kiwibank and takes into account the amount of money you have in your Kiwibank account or accounts before your rate of interest is calculated.
Usually home loans are “table loans”: you are expected to make repayments regularly. If you make extra, voluntary repayments you might receive benefits, but this is something to check with your adviser. Another type of loan you might encounter is the revolving mortgage, which works more like an overdraft. You have a lot of flexibility when it comes to making repayments. A revolving loan may work better for someone whose income fluctuates from year to year, but it also requires a lot of self-discipline.
Using the Canstar website, you can work out which mortgages might give you the best value, taking into account your loan amount and the area you are buying in. For instance, if you are taking out a $500,000 loan to buy somewhere in the North Island (excluding Auckland), KiwiBank’s floating Offset and Variable loans provide you with the best value. Options from Westpac, ANZ, ASB and BNZ also make the top ten. Interest.co.nz provides you with a comprehensive list of all the mortgage rates available, from banks, building societies, credit unions and other lenders: and also has tools to help you work out which interest rate might work best for you.
Credit cards
When you’re selecting a credit card think about how much you’ll use it and how well you’ll be able to pay it back, and whether you need some of the extras – such as travel insurance – that come with different cards. If you are planning on travelling overseas, most banks will have at least one credit card targeted towards travellers.
Interest rates vary, and most banks also have separate rates for purchase interest and cash advance interest. If you choose to use your credit card to withdraw cash, you will generally have a higher rate of interest for that transaction.
Generally speaking the top interest rate for purchases tends to be about 20.95%. Many banks have lower-rate options, for instance Kiwibank, which has a 9.95% option, and ANZ and BNZ, which have options starting at 12.9%. Be on the lookout for other perks and rewards credit cards offer you, including fuel benefits and cash back rewards, as well as purchase and price protection insurance. These types of insurance protect you if something happens within a specified period of time to your purchase, or if you pay a large amount for a product that later comes on the market at a much cheaper rate.
KiwiSaver
KiwiSaver is a voluntary savings scheme for New Zealanders, and there are a wide variety of schemes on offer. These schemes are often divided into conservative (low risk), balanced (moderate risk) and growth (high risk) funds. There are also very high risk “aggressive” funds, and very low risk “defensive” funds (often investments in recession-proof industries). Mainstream banks usually offer a combination of conservative, balanced and growth schemes.
As an example, BNZ’s KiwiSaver Scheme – Growth Fund is rated the best performing growth KiwiSaver fund in the country by Canstar if you have around $50,000 to invest. If you’re looking for a conservative fund to invest this amount of money in, then ASB and BNZ are ranked fifth and sixth respectively behind other schemes, and ANZ comes in in tenth place. When it comes to a balanced fund, BNZ, ASB and Westpac also make the top ten.
Insurance
Banks frequently offer insurance cover: house and contents, life and income, and vehicle insurance may be offered through your bank, as well as insurance for your business. Look out for other options such as bill protection (which protects you if you’re made bankrupt, or are made redundant suddenly). If you have taken out insurance through your bank, or if you’re thinking about this option, Quashed’s Market Scan tool allows you to compare car and contents insurance offered by your bank to other possibilities out there.
When you get your credit card, don’t forget to add it to your dashboard in Quashed! This will allow you to see the insurance benefits that come along with your choice of card, such as travel insurance and purchase protection insurance.
Quashed is free – all you need to do is sign up today!
Ease of finding information
Banks vary in how easy it is to find the information you’re looking for online, and what you can do at home – it’s often possible to open a savings account remotely, but if you are interested in investing, rather than just saving your money, or you’re interested in opening a Notice Savings account or getting a credit card, you may have to go down to your bank in person.
If you can’t find what you’re looking for online or don’t understand the information presented to you, it’s best to speak to someone directly, either in person or on the phone.
