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UBank USaver - online savings account with high interest

Discussion in 'Money Management' started by Simon Hampel, 6th Aug, 2009.

  1. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    NAB's UBank have just launched their USaver online savings account product: USaver - UBank - A good place for money. Backed by NAB

    It's yet another entrant into the increasingly crowded market segment, but there are a few differences to the other accounts I've seen and used:

    • Very fast online setup - no paper forms to fill out and no branches to visit!
    • Can have your salary paid directly into it
    • Can pay money to pretty much any other bank account (pay anyone)
    • High interest rate - currently 5.11%pa (will be interesting to see how long this lasts)
    • Can transfer money in by cheque (handy for amounts higher than the typical EFT daily limits)

    I've set up a couple of accounts - I am sitting on a bit of cash at the moment so I figure I may as well take advantage of the higher interest rates being offered (far higher than the account I have been using!)

    Press release: UBank launches on-line savings account with unbeaten interest rate
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Sim,

    Why would anyone put money in their term deposits between 3.06% to 4.91% when you can get 5.11% at call?

    PS How does UBank make money if they are paying those sorts of rates? Obviously not homeloans at about 4.99% from NAB.

    Cheers,

    Dan
     
  3. ashwright

    ashwright Well-Known Member

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    Easy, borrow from the depositor at 5.11%, write a couple of (say 2) home loans at 4.99%. Profit mad 4.99*2-5.11=4.81% profit.

    I forget exactly how much a bank can lend on top of their deposit base. But it works something like that. They leverage the deposits to buy more investments (banks invest in loans).

    5.11% is a pretty impressive rate though.
     
  4. AsxBroker

    AsxBroker Well-Known Member

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    You mean fractional banking?
     
  5. austing

    austing Well-Known Member

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    Hi Gang,

    In regard to the interest bonus of 0.10% when a monthly savings plan of $100 or more is setup be aware that if you have more than $150K in the account it doesn't apply. This wording has caused confusion where some assume that you still get the bonus interest on the first $150K even if you have greater than this amount in the account.

    Therefore simply setup multiple accounts with less than $150K in each. New accounts can be created on the fly once the first account is setup.

    I'm really impressed with the USaver online banking facility. It will be interesting to see how long NAB maintain the current high rate of %5.11!

    Cheers - Gordon
     
  6. davo6253

    davo6253 Well-Known Member

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    I have a USaver now and I just received this email in regards to rate rises (and competition)

    Looks like its not just a 'headline' rate or such offered by other institutions, at least for now. 5.56% with that .1% bonus is quite a good rate of return imo!

    Cheers,
    David
     
  7. Magpie

    Magpie Active Member

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    Raboplus may also be worth a look.

    They're an online arm of Rabobank (probably a familiar name if you're a fan of watching the Tour de France. ) and their AAA rating is apparently the only one at that level in Australia.

    Raboplus

    When you open an account you automatically get 3 - the High Interest (4.5% currently), Premium Saver (5.5% if you make a small monthly increase) and Managed Fund trading a/cs. You can choose to use only the one(s) you like and leave the others unused. Same deal with linking it to an account with your regular bank to shift funds backwards and forwards as needed.

    I'm currently using mine to park cash between term deposits and also build the next parcel to invest. Their term rates bob up and down too, so I've been watching those. In the last few weeks their 5 year rate has gone from 7% to 6.8 to 6.6 and now back up to 7%.

    Cheers,

    Chris

    EDIT:

    Incidentally, Raboplus provide you with a free Digipass, which is a small hand held gizmo that generates additional numbers to increase the level of log-in security. This might be an attraction for some, or seen as an unwanted extra task by others. I have a similar thing from Bendigo Bank (which they charged $20 for) and Westpac use a text message system sent to your mobile for some 'extra security' tasks.
     
    Last edited by a moderator: 7th Jan, 2010
  8. Magpie

    Magpie Active Member

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    Just for fun...


    Would anybody like to take a punt on guessing where these online accounts will stand by the end of the year? :)

    At present Ubank is a new 'product' that seems to be being aggressively priced to attract attention and funds. Their site even contains the sort of rhetoric more familiar in certain retail sectors. Retailers often say "If you can find a better price we'll beat it by....X%" and Ebank has promised to review the rates of six of their competitors every week and at least match them. (Offer valid until end of March).

    As far as I can see, Ubank, Bankwest and Raboplus are all pretty much level pegging with Ubanks's nose currently in front on the basis that they don't require a saving pattern to be maintained. Westpac aren't far behind, but you have to ring every 4 months and prompt them to renew the 'Introductory Rate' (which they will apparently currently keep doing as long as you remember to ask). As far as I can see, Westpac currently seem more interested in staying in front of the term deposit pack with aggressive pricing of 'specials'.

    Anybody like to guess how this particular arm wrestle (the online at call accounts like Ubank and various eSavers) will unfold this year?

    Cheers,

    Chris
     
  9. mustgroove

    mustgroove Member

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    To me, Ubank's single most appealing factor is that there is no conditional "bonus" interest rate. If you read the fine print, other accounts have much lower "base" interest rates, and they pay a higher interest rate on some condition - in the case of Bankwest, you only get the higher rate if you don't withdraw any money within the month. So you could leave your savings untouched for 30 days, but withdraw $1 on the 31st of the month, and bam, you get penalised.

    The overall effect of such "bonus" systems is to make it something of a hybrid between a term deposit and a true on-call account. You only get the higher rate if you don't touch it, which negates the entire reason for having it on-call in the first place.

    Ubank pays the one rate regardless of whether or not you withdraw during the month, or whether or not you deposit more money during the month. Combined with the best rate on the market, and also the fact that you can transfer to third parties directly, Ubank is by far the superior product on the market IMO. Even if other accounts had a higher rate, if it's conditional on not withdrawing during the month, Ubank would still be better IMO because they don't have such penalties (at least at the moment anyway)... hopefully they realise this factor is an advantage their product has over the rest of the market.
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Technically there is a conditional bonus interest rate - they pay an additional 0.1% pa if you set up an automatic monthly savings plan of at least $100.

    ... but I do get your point ... this bonus is relatively trivial - icing on the cake, rather than necessary to achieve a decent rate.

    Their base rate is so much better than anyone else's and they have far more flexibility in how you can manage your money than just about any other product, which I why I like it.
     
  11. mustgroove

    mustgroove Member

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    True, I forgot about the 0.1% Automatic Savings Plan bonus... but that's not really the kind of conditional rate I'm talking about...

    Bankwest pays a market-leading rate *only* if you adhere to an onerous condition (i.e. not withdrawing during the month) which undermines the entire point of the product (i.e. that the money earns high interest, but is "at call"). This system essentially penalises customers for withdrawing money from an account which is advertised as being "at call". Not cool. I wonder how many people are losing big slabs of interest because they either misunderstand or are unaware of this.

    Ubank pays a market leading rate with no such conditions, and then gives you a *tiny* bonus if you adhere to a minor & unobtrusive condition... in fact you could argue that the hassle of setting up an ASP is almost more bother than the extra 0.1% interest is worth.

    Ubank FTW :) I just hope they never introduce a Bankwest-style "bonus" penalty system for customers who withdraw within the month.
     
  12. Vagon

    Vagon Well-Known Member

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    Hi Dan,

    UBank are almost definately losing money. Its loss leading to gain market share. The aim is:

    1. Increase marketshare and at the same time reduce the economy of scales of your ING/Bankwest style competitors.
    2. Target the loss lead market with other products (right now TDs, but you could imagine CCs are not too far away).
    3. Have people create behaviours around your product, organise their direct debits and credits/ automatic transfers through the account etc. Established behaiviours are not efficiently broken.
    4. If it hits crunch time reduce the rates and rely on 3.

    Cheers
     
  13. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    In addition to what Vagon said, there is another benefit to UBank for increasing their deposits - it helps to ease regulatory pressure and increases their (NAB's) buffers and ability to lend out money.
     
  14. mustgroove

    mustgroove Member

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    Makes sense to me...

    On the subject of Ubank, it's interesting how quickly most (if not all) banks cut the interest rate on these types of accounts when the RBA drops the cash rate, but when the cash rate is increased (as it was yesterday), it takes longer for the rise to trickle through...
     
  15. Vagon

    Vagon Well-Known Member

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    Like Sim was saying one of the purposes of these savings accounts is to increase the liquidity pool of the banks. Often times the total required liquidity pool is not very transparent due to fluctuations in deposit amounts and, as you can imagine, when rates rise/fall their can be quite a bit of movement of cash.

    It makes sense from a bank risk perspective to be cautious on passing on interest rates to customers until a decent snapshot of the liquidity pool is determined and the appropriate rate can be determined and then passed on.

    Coupled with the fact that this process probably involves a number of internal deparments and it explains the delay.
     
    Last edited by a moderator: 7th Apr, 2010
  16. mustgroove

    mustgroove Member

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    Ubank have changed their ASP bonus interest rate system:

    So the monthly ASP requirement doubles, and so does the bonus interest rate, but whereas you could structure multiple Usaver accounts under the old system to milk the ASP bonus on balances all the way up to $1M (or whatever their max balance is), the new cap is $200,000.

    This is obviously a win for people with <$200,000, and considering that Ubank never raised their interest rate following the RBA's rate hike last month, it seems as though this is Ubank's new strategy for dealing with rate hikes - tinker with the ASP bonus.

    Thoughts? Ubank may not strictly-speaking have the very top interest rate anymore (even with the ASP bonus) but the fact that the bonus interest rate depends on making deposits rather than abstaining from withdrawals still makes Ubank a winner IMO
     
  17. Magpie

    Magpie Active Member

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    I agree with all your reason why companies use loss leaders, but why should there be any reason to compare the rates only with home loans?

    NAB make all sorts of loans at much higher rates - such as personal loans (at over twice the Ubank rate) and a variety of other commercial and personal products. Given that savings are typically for relatively short terms compared to home loans, wouldn't it be reasonable to balance those funds against shorter term loans such as Personal Loans anyway?

    I guess that's not exactly how it works, but I still wouldn't think that Ubank is necessary making a loss at 5.85%.

    Cheers,

    Chris

    Incidentally, Ubank currently have some sort of glitch with their on-line software. When you log in, the account balance graph can be displaying the wrong information. Apparently it's a known problem and they're working on fixing it. The actual account details seem to be fine. Just the graph that can be erratic.
     
  18. fundies

    fundies Member

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    6.51% atm, with savings bonus. Good.
     
  19. FrugalPoodle

    FrugalPoodle Member

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    While you get a decent rate, the online banking is excruciatingly slow to use, I'm hoping they switch to something else.
     
  20. fundies

    fundies Member

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    Agreed totally. Fortunately for me, my Ubank account is JUST a savings account, so the money goes in and I rarely touch it, so the slowness doesn't bother me. I have noted frustrated members on their forum though.
    I'm glad I can an least earn this rate of return, seeing that the stock market is flapped atm, real estate prices ( investment ) aren't real, etc etc. Hopefully some other opportunities open up in the near future.