Cash Management Account

Personal Investment

Wednesday July 31, 1996

Janelle Carrigan

GOLD HongkongBank

SILVER Metway

BRONZE State Bank of NSW

Small savings plans, such as putting away $10 each week, are straightforward enough: just set up a savings account and transfer or deposit money into it regularly. But once savings have accrued and balances start to reach the $5000 to $20,000 mark, the decision-making process becomes harder. Interest rates of 7 or 8 per cent can be gained if the money is placed in a term deposit. The tradeoff is that funds cannot be withdrawn - accessed only at the end of the term.

The funds could be placed in a personal transaction account or a savings investment accounts. However, these are geared towards smaller amounts, generally paying less interest with more emphasis on regular access.

Alternatively, funds could be placed in a cash management trust, which, as the table shows, offers slightly higher interest rates than standard cash management savings accounts. But trusts are not as easily accessible as their saving account counterparts, with few offering ATM access, and fees on transactions tend to be higher.

Cash management accounts tend to be the logical choice for serious savers, as large sums of money can be put to work, with the flexibility of immediate access to funds. Most accounts require a minimum monthly balance of at least $5000 before interest is paid. Interest payments are tiered: the higher the balance, the better the rate. A $5000 balance might attract 5 per cent, but $20,000 might earn 6 per cent.

Last year's cash management winners have been pushed aside, making room for new contenders. HongkongBank's 24-hour Money Market Account accrued the bulk of its points for very high interest rates, offered consistently throughout the year. While the majority of banks carried a tiered interest rate structure, the differential between HongkongBank's tiers was small. As this account is predominantly used as to generate interest at the highest rate possible, rates accounted for almost 60 per cent of the points. After HongkongBank, Metway Bank also rated well in the interest rates stakes.

State Bank's fees were much lower on $2.60 a month, with a number of banks, including Town & Country, Bank of Queensland and St George, not imposing any fees on the account. BankWest customers can take advantage of fee-free banking through other avenues, by nominating the account as free of charges under the BankWise scheme. For a monthly fee, two accounts carry no base charges regardless of the balance, with annual fees also waived on Bankcards and Visa cards, and discounts on loan applications and settlements.

How to minimise or avoid fees

? Maintain a minimum monthly account balance of $500.

? Combine your accounts. If you hold several accounts, you might find it easier to maintain a minimum monthly balance if you combine them into one account.

? Stay within the fee-free withdrawal limit. By planning your banking, if you have a minimum balance of under $500, withdraw fewer but slightly larger amounts.

? Use the bank's own ATMs to withdraw money and pay for goods. Using other banks' ATMs may incur a higher fee, with average charges of between 50 and 75 cents.

? Link the account with other bank facilities. The bank may waive account fees if the account is linked to other products, particularly loans.

Source: National Australia Bank

Cash management
 placings
 Bank                   Interest        Fees    Features        Term &  Total
                        rates                   conditions points
 HongkongBank           321.76  19      34      56      100
 Metway Bank            224.96  20      66      43      82.17
 State Bank of NSW              193.58  27.4    46      63      76.61
 National                       152.59  28.5    56      69      71.06
 Town & Country         164.62  30      50      62      71.18
 Bank Melbourne         178.89  29      60      30      69.15
 Bank NZ                        197.96  26.5    28      41      68.13
 Bank QLD               182.31  30      32      44      66.93
 Advance                        167.33  24      34      47      63.22
 St George              177.25  30      36      19      60.88
 Westpac                        149.89  30      52      52      65.91
 Challenge              167.24  28.3    30      23      57.7
 Trust Bank             123.83  30      40      53      57.3
 ANZ                    128.25  30      24      56      55.31
 Bendigo Bank           159.23  27      26      21      54.14
 Commonwealth           148.66  20      42      21      53.78
 BankWest               146.5   21      42      21      53.51
 Citibank                       119.16  19      48      34      51.11
 QIDC                   105.62  30      36      30      46.81
 Adelaide Bank          104.48  22.5    24      37      43.64
 Bank of South Australia        93.12   28.5    16      47      42.86
 ING did not enter. Weightings: Rates 59%, Fees 13%,
 Terms & Conditions 12%, Features 16%
Source:CANNEX

© 1996 Personal Investment

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