If you are paying extra for an offset account, work out whether it is actually saving you money.
That is the whole point of the feature. A full offset reduces the part of the linked loan charged interest. But if the package has an annual fee, a higher rate, or both, some of that saving is paying for the feature itself.
The useful number is your average offset balance. A large balance on payday can look reassuring, but it may not describe what sits there through the rest of the month.
Start with the extra annual cost
Say a hypothetical loan package costs $395 a year more than an otherwise comparable option, and the offset loan rate is 6%. Assume it has a full offset, the cash balance stays below the loan balance, and that the comparison loan gives this cash no interest benefit.
Holding about $6,600 does not make the offset a brilliant deal. It is roughly where the fee stops eating the benefit. At an average $10,000 balance, the simple annual interest reduction is about $600. Subtract the $395 extra fee and around $205 remains.
These are estimates using a constant rate and balance. Your loan balance and offset balance move, and lenders apply their own daily interest and charging rules. The calculation is a useful first check, rather than a quote for your loan.
A rate difference can matter more than the fee
Now suppose the offset loan also charges 0.10 percentage points more than the comparison loan. On a $500,000 balance, that is roughly $500 in extra interest over a year before allowing for the offset.
Add the $395 fee and the offset needs to overcome about $895 of extra annual cost. At a 6% offset-loan rate:
$895 ÷ 0.06 = about $14,917 in average offset savings.
That comparison assumes a $500,000 loan at 6% with the offset, against the same loan at 5.90% without it, and the $395 is the difference in fees. It holds the loan balance constant to make the trade-off visible. Actual amortisation changes the result.
If both products charge the same annual fee, do not count it all as an offset cost. If the offset package replaces another account fee you genuinely pay, include that difference too. Compare what changes between the two realistic options.
Use the balance you actually keep
For a rough review, look at what remained in the offset throughout several ordinary months. Allow for the bill payments and spending that happen between paydays. A bonus that sits there for two weeks is useful, but it is not a year-round balance.
You can make a simple worksheet with three columns: money in the offset, how many days it stayed, and balance multiplied by days. Add the last column and divide by the total number of days. That produces a time-weighted average for the period you checked.
Keep the period representative. If you recently paid a deposit, received a one-off payment or changed jobs, the next few months may look different. A decision based on the biggest balance you have ever had is unlikely to be a useful ongoing review.
What would the cash do without the offset?
The examples above compare the offset benefit with cash receiving no interest benefit elsewhere. That is deliberately a limited comparison. A savings account could pay interest. Extra repayments with redraw could also reduce loan interest, with different access conditions.
If either is your real alternative, compare that alternative directly. Do not count the entire offset saving as an improvement over money that was already reducing interest on the loan. If a savings account is the alternative, its conditions and your own tax position can affect the comparison.
ASIC's Moneysmart offset guide explains the fee, rate and access questions, including the need to check that the account is correctly linked. Redraw access depends on the loan terms; it is not the same account arrangement.
Keep the review small enough to repeat
- Confirm the account is a full offset linked to the relevant loan.
- Write down the extra fees and any rate difference against a realistic alternative.
- Use an ordinary average balance, including the days when bills have been paid.
- Recheck after a material change in the rate, fees or savings you keep.
The Repayment Planner can help you see what an offset balance could change over the loan term. It does not compare product fees, so keep the cost check above alongside its result. Keep a note of your assumptions so you can revisit the comparison with updated figures.
If you already use an offset day to day, the next question is whether changing repayment frequency adds anything. Start by checking where the cash sits and whether you are actually paying more over the year.
Examples are hypothetical, not current product offers. Source guidance checked 9 September 2026.