Offset Accounts
 

Any tips on how to use these to reduce interest payable on your mortgage?

Our offset account allows a maximum of 25 withdrawals throughout the month which includes direct debits, bank transfers, EFTPOS transactions and cash withdrawals

The account has only been open for 1 day and already there's been 5 withdrawals :(

Some guys at work pay for everything with their credit card and then just pay off the balance when the statement arrives but I don't know what they do about withdrawing cash or automating payments i.e direct debits

Cheers

Re: Offset Accounts
 

I have a current account, internet saver and also the offset. I hardly ever touch the offset account, except when we puchase something big like a car. There is a once a month transfer into it. I don't think they are meant to be used like a regular current account or even a savings account. Just use them for money you can put away and forget about.

Re: Offset Accounts
 

We have an offset account but its just there to keep the mortgage costs down. Everyday we use a savings account and a credit card. Like your work colleagues - everything goes on the credit card and its paid off monthly from the savings account. Any left goes into the offset. The savings account is for cash, direct debits etc

As the offset isnt really doing the bank any favours i guess the restriction is to stop you using it as a savings account.

Re: Offset Accounts
 

We have an offset account (line of credit) and I purchase everything on my credit card and pay it off at the end of the month. Any direct debits such as phone bill are paid by credit card (just set your account for the payment to your credit card). All our savings are in the line of credit as this way it reduces the interest monthly and if that money was in our savings account we would need to pay tax on the interest. Any purchases we need to make out of our 'savings' are then paid for out of the line of credit account.

Re: Offset Accounts
 

Why would you need 5 withdrawals in one day.The offset account is not the same as a line of credit.

For a line of credit pay everything on a credit card and pay off the full amount at the end of the month .All wages should go straight into that account so the monthly excess pays off the mortgage faster,and the money left in there reduces the interest on a daily basis until the end of the month.

For an offset leave say 10k in the offset and you will have 10k of your mortgage interest free.Your wages then go into a diferent account (streamline in the case of CBA) for your daily living,although you will still be better off using a credit card for air miles etc.You must pay the card off at the end of the month.The bank should then take your m/gage payment straight from the S/line account.

Another way to reduce the interest is to pay your m/gage fortnightly.Whatever your monthly payment is halve that and pay it fortnightly.That should take around 7 yrs off your m/gage,you are making 13 payments instead of 12 every year.

The only way to do it is to pay more than you need to,anything left at the end of the week/month pay it off the m/gage.Pay the 10k off the m/gage.Most of them have a redraw if you need the money.

The more options on your m/gage the higher the interest rate is the usual case.

Re: Offset Accounts
 

Move to Westpac we have unlimited transaction on our offset, basically you stick all the money you own in the offset, use your credit card (doesnt have to be a Westpac one, we moved to Citibank as it was zero annual fee and 1-1 on $spend to Frequent Flyer points earnt) for as much as possible, set up direct debits for bills etc to the CC wherever possible, set up an auto pay from the offset account to the CC every month on the due date to clear it. All your doing is using your money more wisely by holding onto it for longer so it can be used to offset interest on you mortgage. The other benefit is by what you would normally have in your savings account in the offset account, rather than it earn around 6% interest and you then have to pay tax on it at the end of the year, you offset it and effectively save whatever your mortgage % rate is (probably more like 7.5%) and you dont have to pay the tax on it.

Re: Offset Accounts
 

...if you can afford to pay an extra 8% PA on your mortgage on top of what you're already paying...

Re: Offset Accounts
 

As I said, ATM withdrawals, 'direct debits' , EFTPOS transactions and bank transfers are all classed as withdrawals with this particular offset account.

Depending on what day of the month is it, you can easily accumulate 5 "withdrawals" in one day, especially if the day in question is the same day that your transaction account gets converted to an offset account as ours has.

Of course, this situation will now be rectified

Re: Offset Accounts
 

I got hold of the wrong end of the stick then.I thought 5 ATM withdrawals.

If you go down the credit card route most bills can be paid using the card over the phone.Telstra,rates,rego etc.

CBA give you a run down of all their charges on the monthly statement(streamline),if you have a relationship of over 50k then they are all free.

Re: Offset Accounts
 

so if you want to keep that account but havelots of transactions,open another account and do transfers from that. example 5 transactions of 20$ or do one transaction of 100$ to a seperate account?

Re: Offset Accounts
 

I keep everything apart from a few hundred $ in the mortgage/offset account. The credit card and cheque/savings account are used for day to day stuff. When the cheque/savings account gets a bit low I do another bulk transfer from the mortgage account. This means I do 3 transfers into the mortgage each month and about 6 out.