Are you missing out on free money? How bonus interest works

Most of us know that a savings account pays “interest” but what does that actually mean? And what’s the difference between standard interest and bonus interest?

What is interest?

Think of interest as the reward your bank gives you for leaving money in your account. The more you save, and the higher your interest rate, the more your money grows over time.

If you deposit $1,000 into a savings account with a 1% p.a. standard interest rate, after one year you’ll earn $10. That might not sound huge, but as your balance and the interest earnt increase, so does the growth.

Now imagine your $1,000 sits in an account at 4% standard interest. After a year, you’d have $40, four times as much. Over five years, that difference really adds up.

So, what’s bonus interest?

You might have heard the term ‘bonus interest’ getting thrown about. Some banks, like BCU, offer bonus interest rates on some saving accounts. That’s an extra boost on top of the standard rate, but only if you meet the eligibility criteria.

It’s like a loyalty program for savers:

• Miss the rules → you just get the standard rate that month.
• Meet the rules → you unlock the maximum rate (standard rate + additional bonus interest rate).

The difference between standard and bonus rates can be worth hundreds of dollars a year. 
Find out more about our savings accounts that offer bonus interest, and the eligibility criteria you need to meet to earn it.

Real-life example

Let’s say you have $20,000 in savings, at a standard rate of 0.20%, you’d only earn about $40 a year.

Now, if your bank offered a 4.30% bonus interest rate on top of the 0.20% standard rate, that means you could earn up to a total of 4.50% in interest (if you meet the conditions).

With a maximum combined interest rate of 4.50%, you’d earn around a total of $900 a year! If you put your money in a transaction account, or a saving account with a low interest rate, you could be missing out all that extra cash.

This example is calculated based on interest rates remaining unchanged during this period, which may not always be the case.