Easy ways to save money with an offset account

An offset account can help you to manage the interest payable on your home loan and reach your savings goal.

What is an offset account?

An offset account is a transactional account linked to your home loan that can help you reduce the amount you owe on your home loan.

Interest is charged against your home loan based on the difference between the loan balance and the offset account balance. Essentially, the more you have in your offset account, the less interest you pay on your home loan.

There are two types of offset accounts:

• 100% Offset – all the money in your account can offset the home loan.
• Partial Offset – only a portion of your account balance, usually a percentage or fixed amounts, can offset your home loan.

Here at BCU Bank, we offer a 100% Offset account.

Offset accounts are considered an effective way to minimise interest over the lifetime of your loan.  

How does an offset account work?

For example, if you had a $650,000 home loan and $70,000 in your 100% offset account, you’d only be charged interest on a loan balance of $580,000 ($650,000 - $70,000 = $580,000).

Because your offset account is a transactional account, you could withdraw your $70,000 at any time but you’d reduce the amount of interest you’re saving.

Here’s another example with a smaller loan size:  

How can you use an offset account?

Some people deposit their salary into their offset account and use it like an everyday transaction account. Check whether this is available with your lender, as some offset accounts have restrictions.

Your offset account can also be used like a savings account. This can help you reach your savings goals while still working to reduce your home loan interest.

However you decide to use it, the more money in your offset account, the less interest you’ll pay on you home loan. This could help you to pay off your home loan faster and pay thousands of dollars less in interest over the life of the loan.

Why choose an offset account over a normal savings account?

The interest you pay on your home loan is usually higher than any interest you’d earn on a savings account. In this instance, savings in an offset could be doing more for you than if you had it in a regular savings account.

How can you maximise your offset?

Top tip time! Using a credit card with an interest free period for your monthly expenses can help keep your money in your offset account longer. By using a credit card to make purchases, your money can sit in your account and keep reducing the amount of interest being accrued.

Make sure you choose a no or low-fee credit card option though – and you’ll need to clear the balance on the card by the due date to avoid any interest being charged. Visit our help centre to learn more about how the credit card interest free period works.

What should you look for in an offset account?

Not all offset accounts are the same, so check the details. Consider things such as withdrawal penalties, fees and how easily you can access the funds.

Whether an offset account is right for you will depend on your individual circumstance so consider your options carefully. Contact our team of mobile lenders for more information.

Important information

Banking and Credit products issued by Police & Nurses Limited (BCU Bank).

Any advice does not take into account your objectives, financial situation or needs. Read the relevant terms and conditions, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.