Banks sitting on billions in savers' money as interest rates rise

The big four banks - Commonwealth Bank, NAB, ANZ and Westpac - are holding billions of dollars in customer funds that are not generating interest, according to their annual reports. Consumer advocates are concerned that strict conditions attached to high-interest savings accounts are a larger issue. Savers are advised to be aware of terms and conditions and compare products.

When the Reserve Bank of Australia (RBA) announced interest rate hikes, the major banks increased their maximum savings rates by 0.20 to 0.25 percent. However, Canstar's research found that only a select few savings account products received the rate increases, while others remained on a base rate of 0.10 percent. Unless savers meet strict conditions, such as minimum monthly deposits and withdrawals, they receive almost no interest.

The Australian Competition and Consumer Commission (ACCC) found that only 16 percent of consumers switched their savings accounts in the past three years, and 11 percent switched their transaction accounts. Western Sydney University's associate professor of accounting and financial planning, Michelle Cull, recommended that consumers conduct regular checks of their banking to ensure they are getting the best deal.

She highlighted the importance of considering offset accounts, which save on mortgage interest payments and are not subject to tax.

Despite the rate hikes, hundreds of billions of dollars in customer funds remain in accounts earning no interest. For example, as of June, the Commonwealth Bank held nearly $122 billion in non-interest-earning accounts, while Westpac held $82 billion, NAB held $67 billion, and ANZ held $61 billion. Consumer advocate Sally Tindall urged customers to proactively monitor their accounts and switch to better options if necessary.

The Australian Banking Association's CEO, Simon Birmingham, stated that banks support customers to maximize their savings through various channels, such as app alerts and messages.