When you’re saving for something that matters, whether it’s a holiday, a first home, or just building a safety net, every little boost helps. While its easy to think the only way to grow your savings is to deposit more money, there’s actually a smarter way: let bonus interest do some of the heavy lifting.
Bonus interest is like an extra reward for good savings habits. Its additional interest paid on top of your standard rate when you meet the eligibility criteria, such as making monthly deposits or limiting withdrawals. By unlocking bonus interest, your money works harder in the background, helping you to reach your savings goals sooner.
What is bonus interest?
Bonus interest is extra interest added on top of a standard rate, for a specified period or only if you meet certain simple criteria.
Banks may calculate standard and bonus interest rates using either a balanced or stepped tiering method. The best option for you will depend on your financial goals and how you like to grow your savings.
Balanced and stepped tiered interest
Balanced tiered interest applies the same rate across your full account balance. This approach offers steady returns and can be ideal if you prefer a simple, consistent way to earn interest on your savings.
Stepped tiered interest, on the other hand, applies different rates to different balance ranges. Higher balances usually attract higher rates, which can benefit those with larger savings who are comfortable meeting higher balance thresholds.
How interest works
Standard rate
This is the guaranteed interest rate you earn on your savings, no strings attached.
Bonus rate
Extra interest added to the standard rate, but only for a set time or if you meet the conditions (like monthly deposits or card spending).
Total maximum rate
The sum of the standard rate, plus bonus rate, when the eligibility criteria is met.
If you don’t meet the eligibility criteria, you’ll only get the standard rate for that period. Hit them, and your savings earn much more, helping you get better overall returns. Find out more about the different types of savings accounts, interest rates, and eligibility criteria on offer at P&N Bank.
How much extra could I earn?
Let’s look at how this works using an example. Say you opened a saving account that offered:
- A standard rate of 0.20% p.a.
- A bonus rate of 4.30% p.a. (when conditions are met)
This means you could be earning a total maximum rate of 4.50% p.a. on your money.
Note: Many banks will have a maximum balance you can earn bonus interest on or a bonus interest cap. Always check the conditions of the financial institution before opening an account.
Example
If you:
- had $10,000 in savings,
- deposited $50 a month for a year ($600),
- had a savings account that offered you up to 4.50% combined maximum interest (the standard plus the bonus rate),
- met the conditions to earn the bonus interest, and
- the interest rate during that period remained the same
You’d have earnt about $472* extra in interest on top of your $10,000 and $50 monthly deposits, totalling $11,072. That’s an extra $472* towards your saving goals on top of your own contributions!
Important information
Banking and Credit products issued by Police & Nurses Limited (P&N Bank).
Any advice does not take into account your objectives, financial situation or needs. Read the relevant terms and conditions, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.
*Calculations are based on the P&N Bank savings and term deposit calculator and are intended as a guide only. The results may vary slightly from your actual total interest earned due to assumptions and rounding used in calculations.