"Online" savings accounts - what's the catch?

[willfarb]

So the adverscreens in the elevators at work are showing ads for an "online" savings account (as if the account itself were somehow magically "in" the internet) - www.rams.com.au (This is in Australia).

The account offers 4.95% interest with a further 0.8% interest if $200/mo is deposited with no withdrawals (an easy feat), for a total of 5.75% interest. This is way better than the 3, 5, 7 and 10 year return rates from the Australian Vanguard*1 unless you got fancy and picked juuuuust the right combination.

(*1 https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-retail.jsp#grossperformancetab )

My question is, what's the scam? Can I put my money in this online savings account, or will it one day disappear, eaten by some secret fee, technicality or bankruptcy? If anyone has any knowledgeable input on this, I'd greatly appreciate it!

[arebelspy]

I'm assuming you are in Australia?

Here we have protections on certain bank accounts that the federal government assures.  FDIC insured you can generally have up to 500k and not worry about it getting stolen or lost if the bank goes under, as the federal government will cover it. (Private insurance generally covers amounts above that.)

Does Australia have something similar to protect you?

This says they are a "non-bank" -- what exactly does that mean down there?

www.rams.com.au/about-rams/why-choose-rams/

Many legalese terms are different, so I hesitate to offer advice on it.  We also have something called a Better Business Bureau to look up how many customer complaints a company has and how they were resolved.  Do you have an equivalent to that?

Finally, have you tried googling the company?

That about page makes it seem like they've been around at least a few years, and have been noted by some different financial publications, so they seem to be at least somewhat legitimate.

Let us know how your research turns out!

[gooki]

I'd look at putting my money in a company that is a registered bank as you should get more protection that way.

http://www.rabodirect.com.au/high-interest-savings/default.aspx?lnk=prd-box
http://ingdirect.com.au/savings/savings_products/savings_maximiser.htm

Most of the catches seem to suggest the base interest rate drops after 4 months or so.

If your investing a lot of cash, it might be worth changing banks every 4 months to keep the interest rates high.

[Nudelkopf]

The account offers 4.95% interest with a further 0.8% interest if $200/mo is deposited with no withdrawals (an easy feat), for a total of 5.75% interest. This is way better than the 3, 5, 7 and 10 year return rates from the Australian Vanguard*1 unless you got fancy and picked juuuuust the right combination.

Commonwealth Bank has the same, except only 5% at the moment. Plus it's a real bank:-) And it doesn't drop back to a lower rate after x months.

[Tradies wife]

What about Ubank? Backed by the NAB. $5.71% interest, no minimum, no fees, $200 a month min deposit to meet the criteria for the savings bonus. ?

Looks good to me.

[willfarb]

Thanks for the input everyone. I think I'll do half in a high-interest savings account, half mixed across Vanguard things, after maximum match-able deductions into both my Australian and NZ pensions. I'll evaluate what things look like after a year.

Cheers!