Most banks and deposit-taking institutions (DPIs) in Australia offer either a transaction account or a savings account, or a combination of the two. With a transaction account, you earn less interest on your deposit, but you can withdraw or spend the money in the account more easily. On the other hand, a savings account is designed to earn you higher interest while limiting withdrawals. Some people may prefer opening a high-interest savings account which can help them build up their savings faster while imposing more conditions on the use of the money.
The higher interest offered on these accounts is meant to incentivise saving, but you need to make regular deposits to boost your nest egg. Equally, by making fewer withdrawals, the money in the account will accumulate faster.
Check the account provider’s terms and conditions to see if you need to maintain a minimum balance or deposit a fixed amount every month. Some providers may limit the number of withdrawals you can make and impose penalties, such as reducing the interest rate, if you withdraw more often. In addition, banks may require you to link your high-interest savings account to a transaction account, which can be used for withdrawals and ensure you access the savings account less often