the mozo blog

Richard Branson was in Sydney yesterday, bearing the news that Virgin Money is relaunching its consumer banking arm. Earmarked by Branson as “classic Virgin territory” due to the domination of the Big 4 in the marketplace, Virgin Money has declared its intentions, in alliance with Citibank, to make a ‘fair profit’ on the back of “simple and fairly priced products”. The first cabs off the rank in this quest to take on the Big 4 are in the credit card and savings account market.

Virgin Saver
The Virgin Saver is Virgin’s online savings account, a no fees account with a variable introductory rate of 6.75% for 4 months that falls back to 5.35%. These numbers put it right up there with the top 5 standard and promotional savings account rates in the market and it’s a great product, particularly as it lacks the deposit and withdrawal conditions held by some products.

Virgin No Annual Fee Credit Card
The Virgin No Annual Fee Credit Card is Virgin’s ‘no frills’ card. No annual fee and no rewards of any note. It comes with an introductory offer of 2.9% on balance transfers for six months and an ongoing purchase rate of 16.95%. Whilst promoted as “simple and fairly priced”, there are only 44 interest-free days and the card features the sneaky trick we’ve previously highlighted of reverting the balance transfer to the much higher cash advance rate of 20.99% as well.

If you plan on carrying a debt, using our credit card comparison table one can see that there are other low rate and low fee cards that could save you over $500 over 3 years on an average balance of $3000, taking into account the interest and fee costs. However, if you plan on paying off your balance in full each month, this card will cost you nothing, and is well worth picking up for those who enjoy things like the choice of card colour and Virgin’s customer service.

Virgin Flyer Credit Card
The real headline grabber here is the last product on the list, the Virgin Flyer Card, its Platinum frequent flyer card. And it’s a bit of a Jekyll and Hyde proposition.

What Virgin is hoping will sell this product is the flight rewards. The biggest selling point is that four times a year, you’ll get 2 for 1 flights on Virgin Blue. It’s a great feature that’s sure to appeal to many. Factor in the best earn rate for velocity points without getting an Amex, for the first $1,500 monthly spend anyway, and it’s a very good rewards card. Using our credit card Rewards Revealer, at the Australian average spend of $14000, it’s the clear leader once you factor in the free flights. For the high rollers looking for a Platinum Card, those spending $50,000 a year would only derive more value from the Citibank Emirates Platinum card, taking annual fees and free flights into account.

It must be noted however, that as a day-to-day credit card, it’s a pricey option. The rates’ conspicuous absence from Virgin’s release is a signpost to the card’s steep nature. With a rate of 20.99% for both purchases and cash advances and a balance transfer rate of 6.9% for 6 months that reverts to 20.99%, it’s one of the most expensive cards on the market. Throw in the interest free period of only 44 days and you can definitely say it’s not a card to accumulate debt on.

The Verdict
The Virgin Saver looks a winner, particularly given its simplicity. The No Annual Fee card is a good basic card for those who pay off their balance in full each month, but there are better options for those who like to rack up a debt. Again, the Virgin Flyer card also isn’t one for the debt accumulators, however it makes up for it with an excellent flight rewards program. With home loans yesterday stated to be in their sights, it’ll be interesting to see where Virgin goes next.

Compare all savings accounts and rewards credit cards at mozo.com.au

With high competition for customers on both the lending and savings/deposit fronts, it is often the everyday transaction account that gets forgotten by many providers and consumers. Viewed by many as a simple vanilla account, many Australians are oblivious to the fact that there are some great, innovative products out there, all geared to help them save money.

For example, both BankWest and ING Direct offer transaction accounts that reimburse ATM fees. A more innovative product is Suncorp Bank’s everyday options account, which is an everyday account that can link to multiple savings accounts as well as lock away part of your funds to a term deposit “flexiRate”.

St. George’s latest offering, St George SENSE Savings, is similar in many ways to Suncorp’s with a few different bells and whistles. The ‘SENSE’ account is effectively an amalgam of St. George’s leading savings and transactions accounts with a few clever gimmicks to help things along.

The first innovative add on is that you receive a combined statement for both accounts. SENSE also comes with a range of pretty snazzy and informative graphs that help you track your spending. One of them is a pie chart that breaks down your everyday spending by categories, such as leisure, home expenses, and transport. There’s also a bar graph version that shows these amounts month to month. Plus you get a graph outlining your savings progress in relation to your set target.

There’s also the Sense Rounding Contribution graph -and this is what really sets this product apart. What exactly is a rounding contribution? Well, every time you make a purchase on your debit card, the SENSE account automatically rounds up the transaction to the nearest dollar and takes that balance from your everyday account and puts it into your savings bucket. For example, say I bought a coffee and a croissant on my way in to work that costs me $5.30. If I pay using my SENSE account, $6 gets taken out of my account. $5.30 goes to the barista and the remaining $0.70 goes into my SENSE savings account. The same process also applies to all BPay transactions too. It’s a really nifty way to start saving without putting any effort in.

All the standard perks come too – if you deposit over $2000 a month into the account you don’t pay an annual fee, there’s no minimum balance required, a VISA debit card, and all the convenience of having linked accounts, such as ease of transfers and regular payments. The savings account comes with a reasonable 4.85% rate as well.

So hats off to St. George. They’ve managed to craft a simple, yet intuitive and innovative product that redefines the relationship between the transaction and the savings account. For all those that struggle with saving, or simply having to manage two accounts, this is one option that could make a lot of SENSE.

Find the best savings account rates at mozo.com.au.

The words ‘tax’ and ‘exciting’ make strange bedfellows at the best of times, but it really can be described as a potentially exciting time for Australians on the tax front. Consumers look set for a double boost this Sunday, when the Federal Government finally releases its findings and decisions derived from the ‘Henry review’ of the tax system. Chaired by the head of the Federal Treasury, Ken Henry, the review has been labeled as a “root-and-branch” review of Australia’s tax system, and by all reports consumers could see gains with regards to both their savings and their mortgages as a result of some of the potentially adopted findings. Dr Henry handed over the report to Treasurer Wayne Swan in December 2009 and since then, Treasury officials have been working on the government’s response to the review.

In terms of Australia’s banking climate, the review looks set to cause a possibly portentous shake-up of the savings account market. Australia is one of the few countries in the developed world to currently tax bank savings at the full rate, a tag which by all reports will be shed soon, with the government preparing to offer significant tax breaks on savings. Whilst the extent of these breaks are as yet unknown, they are unlikely to match the UK model of which where individuals can deposit close to $17,000 (£10,200) tax-free. Dr. Henry is a known admirer of the UK system, yet many in the media are purporting rumours that something similar to the concessions currently in place for superannuation accounts will be announced instead. However, considering the range of options available in terms of size, scope and delivery, there’s no way to be sure till we hear what Wayne Swan has to say himself.

The tax break would also be a huge boost for Australia’s banks as it could generate billions in additional deposits, potentially lowering their funding costs through reducing the reliance on overseas finance. As a result of this, consumers could potentially receive a boost with regards to home loans payments. The banks have been very quick to use high funding costs to justify mortgage rate rises above that of the Reserve Bank‘s cash rate increases. With funding cost pressures alleviated to a significant degree, the government may well turn around and use this savings deposit boost as political leverage aimed at forcing banks to keep mortgage rates down and in turn, voters happy.

Either way, as far as the banking industry is concerned, consumers look to finally be on the receiving end of some good news. Mozo’s Rate Chasers will have a full wrap-up of all the implications for both deposit and lending accounts here on Monday, so be sure to check back to see what all the new changes mean for you.

Compare savings accounts at mozo.com.au

As the clock ticks and the dust settles around Citibank’s Tuesday bombshell with the announcement of its Online Saver account, Friday looms as a landmark day in the escalating ‘Savings Account Price War’. Earlier last month, UBank issued a press release announcing a ‘rate assurance’ on its flagship USaver product, declaring that if the USaver base rate is lower than that of any of its competitors’ base or introductory rates, UBank will raise the USaver rate to match it. The assurance only lasts till the end of the year and is limited to the following products:

• ING Direct Savings Maximiser
• Bankwest TeleNet Saver
• Commonwealth Bank NetBank Saver
• Westpac eSaver
• ANZ Online Saver

Every Friday, UBank reviews the competition and makes changes as they see fit. The question is: will UBank take the bait and add the Citibank Online Saver to its list? If it does, it will be forced to match Citibank’s introductory rate of 5.5%. If it doesn’t, would UBank’s customers feel it is shirking its promise to lead the field? With the fickle high-interest savings account market largely driven by interest rates, can UBank afford to concede defeat over Citibank’s introductory period?

If Ubank fails to match the Citibank rate we could well see a raft of increasingly technologically and fiscally savvy consumers opening a Citibank Online Saver account for six months to take advantage of the higher rate and then transferring it back across to their USaver when the promotional period ends. With the ease of online money transferring and account application, this could pose a real and direct threat to the USaver.

As the adage goes, ‘you can’t win a war on a peacetime budget’, and the longer UBank fails to acknowledge the threat posed by Citibank, the greater chance it has of losing what market advantage it currently has.

So will battle lines be drawn? Keep your eye on the fireworks right here, as we bring you UBank’s response from the front lines tomorrow.

Compare savings accounts at mozo.com.au

Citibank has lobbed a savings grenade into the battle for the best high-interest account. But has it missed its target (Ubank) to land somewhere behind the Big Four’s line?

The answer lies in the little asterisk that sits next to Citibank’s brand new interest rate, making me a little bit uneasy – like sitting next to unexploded ordnance. First, let’s check out the big print numbers:

UBank USaver = 5.46%
Citibank Online Saver = 5.50%
UBank USaver = maximum amount of money you can have before you are subject to lower interest is $1,000,000.
Citibank Online Saver = maximum amount of money you can have before you are subject to lower interest is $2,000,000.

Pretty convincing, huh? But before you take that spare $1,999,999.99 and plunk it into the Online Saver, let’s dig a little deeper.

While Citibank does have the higher interest rate, it’s only for the first 6 months after opening the account. And then USaver has the option of setting up an automatic savings plan which gives you an extra 0.10% (for balances of up to $150,000) if you put away a minimum of $100 per month. So if you’re prepared to commit a small amount more to your savings (and $100 a month isn’t such a hard ask), you’re looking at a variable rate to 5.56% with no other strings attached.

The only real benefit that the Citibank account has over the USaver is that you can have up to $2,000,000 in your account before the interest rate drops back to their standard variable rate of 4.25%. Whereas the USaver rate stays at a minimum of 5.46% for balances up to $1,000,000.

Compare savings accounts at mozo.com.au