SYDNEY, Australia – Australian neobank, Xinja Bank, finally cut the interest rate for its high-yield savings accounts, forced to keep up with the central bank’s successive rate cuts in the previous months.
Like other traditional lenders in the country who previously followed with the rate cuts from the RBA, Xinja Bank now experiences the struggle to keep up with the policy moves from the central bank. Despite holding on for long, the mobile bank decided to reduce its offered rates.
Effective May 11, 2020, Xinja Bank will impose slashed rate for all its high-yield savings accounts. According to the Aussie mobile bank, the primary reason for their bold move is the change in interest rates in the country. The central bank already slashed Australia’s interest twice since January, which led to major banks and lenders needing to cut their percentages as well.
From its previous 2.25% offered for its high-yield savings accounts, Xinja Bank now puts that into a meagre 1.8%. Based on the last statement from the Aussie neobank about its decision to cut rates on its Stash savings accounts, the change will take effect by May 11.
Xinja Bank’s Stash account is a relatively new offering as they launched this product only in January. Before the mobile bank decided to cut the interest rate for this product, Stash savings account holds the highest percentage of interest offered all over the country.
From its previous statements, Xinja Bank said that its interest rate reduction is due to the country’s central bank, Reserve Bank of Australia, cutting the country’s interest twice already. The central bank slashed rates to 0.50% early on March, then followed it with another rate cut around the middle of the month, bringing the country’s interest rate at its lowest possible at 0.25%.
Eric Wilson, the founder and chief executive of Xinja Bank, said that they held the 2.25% interest rate for products as long as they could. They did that despite the successive slashing of rates done by the Reserve Bank during the first quarter of 2020, he said. Xinja Bank is among the few, if not the only bank in the country that held off on cutting rates after the consecutive rate cuts made by the central bank.
Mr Wilson commented that they tried to maintain their interest rates as they thought it was the best thing to do to protect the interest of their existing customers. That is opposed to chasing new clients with a much lower interest rate, he said.
Xinja Bank was able to accomplish not decreasing its rates by holding off on accepting new customers opening Stash accounts.
Unfortunately, the Australian neobank followed other major banks in the country who got their rates decreased earlier in the year. Mr Wilson commented that with it being a variable rate, they couldn’t hold off and ignore the two rate cuts from the central bank indefinitely.
With that, Xinja Bank decided to reduce their interest rate effective May 11, 2020.
Meanwhile, the neobank CEO stated that what they are currently offering, at 1.8%, is still one of the most competitive rates for Australian savers. Their products also don’t include harsh conditions that traditional banks usually impose on their high-yield savings accounts.
A statement from the Xinja Bank stated that their Stash accounts would stay as a no strings attached offer. It won’t include a minimum balance requirement and no minimum spending required either. Savers also don’t need to access their accounts a certain number of times to qualify for their 1.8% interest rate.
All Stash account holders will earn 1.8% for every dollar they saved, with the interests calculated daily and which the neobank will pay monthly. Maximum savings for the accounts is $245,000, which comes with a guarantee from the Australian government.
The Australian mobile bank got its full banking license late last year, but it was already on the banking space of Australia since 2017. It quickly became one of the fast-rising mobile banks in the country. It currently holds more than 47,000 accounts all over Australia with over $500 million worth of deposits.
Back in January, Xinja Bank already offered 2.25% rate for their high-yield savings accounts when the country’s official cash rate was down at 0.75%. Two rate cuts from the central bank followed in March, for which Xinja Bank didn’t leverage on until now.
Aside from their offers for high-yield savings accounts, like their Stash account, Xinja Bank also offer different banking products at the moment. More are coming on their product list as well, such as the personal loan offers, which will hopefully come in August.
Meanwhile, before Xinja Bank decided to cut rates for its high-yield savings accounts, it already turned away customers who are opening new savings accounts with them. However, the Aussie digital-only mobile bank previously stated that they expect to begin opening their Stash accounts again after a couple of months, possibly when the fears over the COVID-19 pandemic will normalize.