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How can I maximise interest savings with my offset account for minimum effort?

Maximise offset benefits, minimum effortYou have an 100% offset account as part of a professional package loan and it’s correctly linked against your owner occupied home loan.*

With each monthly statement, you can see you’re saving interest but you’d like to see if you can push those interest savings higher.

If you want to squeeze every little interest saving benefit from your offset account, here’s a few things you can try.

 

Ensure all household income is paid into your offset account

You should have all wages, tax returns, investment income and windfalls (if you’re lucky!) paid into your offset account. Since every dollar sitting in your offset account is working to reduce your interest cost, it makes sense to have all income paid into this account.

 

Consolidate savings accounts

Likewise, having money sitting in savings accounts with different institutions is costing you money in terms of lost interest savings. Especially if you’re also paying account keeping fees on these accounts.

The benefit of an offset account is that it SAVES you more interest than you could earn in a traditional savings account. This means you want it to contain all your cash, so every last dollar is actively working to reduce your net debt and therefore the interest you pay on your home loan.

 

Check options with your lender

Some clients like to have separate accounts marked for different purposes. For example, you might have an account you’re using to save for a big holiday or perhaps you have separate accounts for each of your kids. This can be a good way to help you manage money, but not if it’s costing you more in interest as a result.

The good news is that with some lenders, you can have the best of both worlds by using multiple offset accounts. You can still spread your cash across different accounts, but it’s all helping to offset your loan(s).

 

Keep money in your account for as long as possible

Interest is calculated on a daily basis, but generally paid monthly.  So, an easy way to maximise interest savings is to keep as much cash in your offset account for as long as possible. But it’s not so easy to always keep money in your account…. what happens when you need to pay a bill?

To keep cash in their account for as long as possible, some clients use a credit card to cover all expenses they incur over the course of a month. When the credit card bill is due, they simply pay the bill in full from their offset account.

Whilst you’re still covering all your expenses, a credit card gives you a little longer to actually hand over the cash. And whilst this cash is sitting in your offset account, it’s working to help to reduce your interest charges. So each day that it stays there, the less interest you are charged.

This strategy can be an easy way to save a little more interest out of your offset account each month. But it only works, if you pay your credit card bill in full when it’s due.

 

 

* If you set up your original loan directly with a lender, it is worth checking to ensure your offset account is properly linked to the correct home loan. You may be surprised at how often we meet new clients whose offset accounts were never set up correctly when their loan was initially established.

** If you don’t have an offset account as part of your loan structure, here’s some details about how offset accounts work and why you might want one.

 


 

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