Savings vs Offset Account - Latest News
We all know the old adage “it is wise to save for a rainy day”. The question is, how to make our savings work to the best financial benefit.
With savings many of us want easy access to our cash, but general access accounts do not tend to pay high rates of interest. The going rate on a standard access savings account is somewhere between 0.01% to 4%p.a depending on the financial institution.
If you have $10,000 in an account paying an annual interest rate of 3% pa, your annual earnings would be around $304.16. This is seen as income and therefore, you pay tax on the interest earnt on your own money. If your tax rate is around the 30%, you would pay $91.25 to the tax department and get to keep $212.91.
However, with many of us are paying around 6.5% to 7.5% p.a. on our mortgages, it may be a smarter option to have a 100% offset account linked to your home loan.
If you had your savings of $10,000 in your offset account and you are paying 6.75%pa interest on your mortgage, you would save $675.00 per year in interest and as this is not earjings, you do not pay tax on the offset benefit. In this scenario, you are $462.09 annually better off with an offset account.
Another benefit with an offset account is that you can have your wages credited into your offset accounts. By using an 'up to 55 day' interest free visa card for most of your monthly expense and setting up a sweep to clear the balance monthly, you can keep your funds in your offset facility for longer. Whilst your income is in your offset facility you will enjoy further savings in interest repayments.
The Barnes offset account comes with a debit card, internet and phone banking. Direct Debits can be set up from the offset accounts for further convenience. Offset account comes with 10 free transactions per month, Bendigo ATM can used to avoid withdrawal fees visa transactions free etc. For further information, please do not hesitate to contact us on 1800 99 88 55.
Janelle Rayner
Managing Director
Barnes Home Loans Pty Ltd