What are interest rates?
An interest rate is a certain amount you either pay based on the money you’ve borrowed or earn based on the money you’ve saved.
Interest paid
Interest paid is the amount you’re charged when you borrow money from a lender, such as when you take out a loan. This rate is a percentage of the loan amount and can be based on a number of different factors.
So how do you pay back the interest? Well, you’ll repay a portion of the amount you borrowed from the lender on top of the interest regularly. This repayment can be made every month, fortnight or week – whatever works for you.
The amount of interest you need to pay will decrease over time because the interest is calculated based on how much you owe, which is hopefully getting smaller with every repayment!
Interest earned
Interest earned is the amount a bank pays you to save money over a period of time. This type of interest is calculated daily by your bank and deposited into your savings account at the end of each month. So the more money you save each day, the more interest you earn.
Some banks might offer a flat rate that’s paid no matter how much is in your savings account. Others might have balance brackets, where certain amounts of money in your savings can influence the interest rate on the account.
Interest earned is the type of interest we’ll be explaining in the rest of the article.
Which bank accounts can earn interest?
Standard savings accounts
A standard savings account, like our Everyday Saver Account, is often opened at the same time as a transaction account. This type of account comes with a flat rate for balances up to $750,000 and no additional requirements for you to earn interest.
These savings accounts are also quite flexible. As there are no interest-earning conditions, you can withdraw from your savings when you need to and still earn interest on the remaining balance for the rest of the month.
High-interest savings account
A high-interest savings account can help you grow your savings smarter and faster. These accounts usually come with higher interest rates, hence the name. But unlike a standard savings account, there are some boxes you’ll need to tick to get the extra interest.
For example, to qualify for bonus interest on our Home Saver Account, you must deposit at least $2,000 into your linked Everyday Edge Account and make at least five purchases with your Great Southern Bank Visa Debit card every month.
Term deposit
A term deposit is when you lock away a sum of money for an agreed length of time (the ‘term’). To make the most of a term deposit, you should leave your money in the account until you can access it at the end of the term.
However, you can access your term deposit money if you give us 31 days’ notice or if you’re experiencing financial hardship. Withdrawing your money early will affect how much interest you’ll earn.
If you leave your money untouched for the full term, it will grow thanks to the guaranteed interest rate. The rate is influenced by how long you want to keep your money locked away for.