Hundreds of thousands of New Zealand savers could be earning a tiny fraction of the headline rate advertised on their everyday savings account, with two well-known banking voices this week saying the design of bonus saver products rewards the bank rather than the customer.
The criticism came from Kiwibank chief customer officer retail Mark Stephen and Squirrel chief executive David Cunningham, both quoted in an RNZ personal finance report by Susan Edmunds.
Bonus saver accounts at the major Australian-owned banks pay competitive headline rates only when the customer meets a strict monthly behaviour test. ANZ pays 1.55 percent on its Serious Saver account if the holder makes no withdrawals during the month and deposits at least 20 dollars. The rate falls to just 0.05 percent if either condition is missed. ASB pays 1.6 percent on its Savings Plus account on the same no withdrawal condition, also dropping to 0.05 percent for any breach. The interest rate gap between bonus and base is roughly thirty fold.
Kiwibank and BNZ are the only large banks that do not offer this kind of conditional product.
Stephen told RNZ that “when life doesn’t run exactly to plan, those bonus rates can fall away surprisingly easily” and that “a single unexpected expense can mean the bonus disappears for the month, leaving savers earning a very low base rate instead.” He argued the cost of living pressure flowing from the Middle East conflict made the issue more acute, because households dipping into savings to cover unexpected bills lose the bonus exactly when they can least afford to.
His framing was that the problem sits with product design rather than customer discipline. “Savers don’t miss out on bonus interest, because they’re careless. They miss out because real life doesn’t always align with rigid conditions set by your bank,” Stephen said. “When savings products rely on people behaving perfectly every month, value naturally shifts away from customers to the banks.”
Cunningham, who ran The Co-operative Bank before founding fintech lender Squirrel, was more blunt. “If you look at the base interest rate, if you don’t do the required task, it’s hopeless. It’s gaming the customer,” he told RNZ.
He gave a useful piece of historical context. Bonus saver accounts began in New Zealand around 25 years ago, when bank deposit rates were running in the 11 to 13 percent range. The intent then was to pay a small premium of perhaps 1.5 percentage points on top of an already healthy rate to encourage regular saving. Cunningham said the structure has since been quietly inverted. “Over time, it became, ‘Pay them bugger all, unless they do what they’re required and that makes the bank make more money’.”
The mathematics of who actually earns the bonus are revealing. Cunningham said his experience running these products was that roughly half of customers would meet the monthly conditions and earn the bonus rate, but those customers held about 80 percent of the funds by dollar value. “People with more money in there are more conscious of making the deposit,” he said. The implication is that customers with the largest balances are most likely to capture the headline rate, while smaller balances disproportionately end up earning the 0.05 percent floor that is the practical difference between earning almost nothing and nothing at all.
ASB defended its product, telling RNZ that the bonus saver structure “encouraged more disciplined saving by rewarding customers who made limited, fee-free withdrawals with higher interest.” The bank said it actively contacted customers with large on call balances to suggest term deposits or other higher interest options. “In the past 12 months, we’ve contacted more than 190,000 customers to encourage them to consider higher interest-bearing alternatives and make their money work harder for them,” the bank said.
For households trying to work out whether their savings are pulling their weight, the practical test is simple. The advertised bonus rate only matters if the holder is confident they will not need to touch the money in the relevant month and will remember to make any required deposit. Anyone who has dipped into savings to cover an unexpected vet bill, a school cost or a fuel top up in the past quarter is likely earning the 0.05 percent base rate, which after inflation amounts to a deeply negative real return.
The wider context is that net interest margin, the gap between what banks pay depositors and what they charge borrowers, is one of the most important drivers of bank profitability in New Zealand. Every dollar that sits earning 0.05 percent rather than 1.6 percent is a dollar that helps support that margin. With the four big Australian-owned banks generating combined annual profits in the billions of dollars in this market, the design choices baked into everyday consumer products are not minor details.
The simplest practical response for a household with a few thousand dollars in an idle bonus saver is to look at the bank’s plain on call rate, the rate offered by the smaller banks who do not run bonus products, and any short term deposit options. The Reserve Bank also publishes monthly retail interest rate data on its website, which makes a like for like comparison straightforward.
Are you sticking with a bonus saver account, or have you already moved to a flat rate account or a term deposit? Tell us what is working for your household in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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