How can $20,000 in savings earn only $10 interest a year? We asked NZ’s big banks what’s going on

Saturday, 9 May 2026

ANALYSIS: The headline interest rate attached to your savings account isn’t always what you get in practice.

It pays (literally) to take note of the small print, because a few seemingly innocuous conditions can preclude you from earning an interest rate.

These savings accounts can go by many names – Serious Saver, Savings Plus, Rapid Save or Bonus Saver, to name a few – but the principle generally operates in the same way.

In return for putting your money in one of these accounts, your bank will reward you with interest earned on the balance (a privilege you rarely get with a standard on-call account). The interest rates associated with these accounts usually range from 1.25% to 1.70%.

It seems like a fair exchange, right?

Well, that is, until you look at what’s actually being offered.

Generally, the banks will offer a base rate, supplemented by a bonus rate on top.

And here’s the catch: the base rate is often as low as 0.05%, and you’ll only get access to the full amount if you meet certain conditions.

Among the country’s five biggest banks, only Kiwibank (1.50%) and BNZ (1.70%) offer the full amount as their standard base rate. Kiwibank has no conditions attached to this, whereas BNZ allows savers one free withdrawal, followed by a $3 charge thereafter.

ASB, ANZ and Westpac aren’t quite as generous. All three of these banks offer a base rate of 0.05%, rising only if the following conditions are met:

• ANZ requires customers to make no withdrawals and to increase their balance by at least $20 per month.

• ASB limits withdrawals to only one on the first day of the month.

• Westpac requires customers to grow their balance by at least $20 from the previous month.

The cost to savers

This may not seem like a big deal in the grand scheme of things, but Kiwibank’s chief customer officer for retail banking, Mark Stephen, told me these numbers can add up quickly.

“A customer with a $20,000 savings balance earning 1.5% per annum earns $300 in interest over a year,” he said.

“At a base rate of 0.05%, they earn around $10 per year. That’s a difference of approximately $290 in interest over 12 months.”

New Zealanders have around $86 billion currently sitting in savings accounts, which means that Kiwis stand to sacrifice hundreds of millions of dollars in interest earned if they do not meet the conditions outlined.

Remember, even the most generous rate offered by a bank will still have a decent interest rate margin (the gap between what a bank pays savers and what it charges borrowers). The bigger the gap, the more money the bank essentially makes.

'If a large proportion of those customers are only getting the 0.05%, then we would question whether that's fair,' said Stephen.

Many Kiwis will use these accounts for their emergency funds: money you might not need immediately, but which can be accessed if an urgent need arises.

Savers, Stephen stressed, shouldn’t be punished for using their savings accounts in the way that they’re intended.

“Roughly half of our customers dipped into their savings products last year to cover some short-term expenses,” he said.

“That actually shows it's working…The purpose of [these accounts] is so that your surplus funds are earning a fair return when you don't need them, but they're absolutely accessible when you do need those funds.'

What do the major banks say?

Stuff asked ANZ, ASB and Westpac why they have incorporated these conditions when other banks have chosen not to.

Spokespeople from all three banks noted that these products are designed for maximum flexibility and that other products would certainly offer better returns on savings.

An ANZ’s spokesperson said customers ultimately have to decide which accounts best suit their needs.

“We prompt customers to let them know how they could optimise their current products,” they said.

“This includes reminding a customer how to earn Premium Serious Saver interest.”

On the topic of prompting customers to consider their options, ASB’s spokesperson confirmed that the bank had contacted more than 190,000 customers to encourage them to consider higher-interest-bearing alternatives and make their money work harder for them.

Westpac’s spokesperson made a point of drawing attention to some of the other options that savers could be tapping into.

“For customers who are saving for a particular goal, or aren’t sure they’ll be able to contribute to their balance monthly, we’ve held our 32-day Notice Saver offering at 3.00%,” the spokesperson said.

This is a far higher rate than one would get through a standard savings account, but it would require greater discipline, in that the money can’t be touched for that period.

“For customers who don’t need to access their money in the short term, we also offer great value through our term deposits, including an eight-month rate of 3.50% per annum and a 12-month rate of 3.85% per annum,” the Westpac spokesperson said.

What should you do with a lump sum?

A key learning from this is to take your bank's prompts to rethink your money seriously. All local banks offer a range of products, and it can pay to keep track of what’s being offered.

I went to Tanaz Jadine, an experienced financial adviser at Stuart Carlyon, for an independent view, and she told me that on-call accounts serve a very specific purpose and are designed for the short-term parking of money.

They’re generally used as emergency funds, cash held between property transactions or funds earmarked for near-term investment opportunities.

“For such purposes, keeping cash on call makes sense, but used for anything longer term, they don’t,” she said.

“ Liquidity has a price. The more accessible your money is, the lower the return tends to be. That’s not punishment. It’s simply the cost of certainty and flexibility. When money is being held for a clear short‑term reason, return isn’t the focus; accessibility is.”

Asked what a Kiwi holding $20,000 should do with the money, Jadine said the best approach is to understand what that money is actually for.

“A bucket approach can work well,” she said, explaining you could keep some on call for immediate access (three months or less), allocate some to shorter term deposits (of three to six months), and potentially use cash or income funds for the rest.

Doing this means you don’t simply leave all the money in one place where it earns a relatively low interest rate.

If anything, this is a reminder that good money management comes down to understanding what your money is currently doing for you, what’s available to you and how much of a difference it could make.

Complacency will never be able to connect those dots for you.

So what’s your approach to your emergency fund or savings? Do you split it or keep it all in one place? Let us know in the comments section below.