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Should you keep your savings at-call?

In the current interest rate environment, are term deposits the best option for you?

Term deposits have traditionally offered higher rates than online savings accounts to compensate investors for their long term risk. However, the current economic climate and future outlook has meant that some online savings accounts now have better rates than those offered by term deposits.

Online savings savings accounts allow to access your money at-call without being charged fees. With a term deposit (fixed savings) you can’t withdraw your money until the maturity date unless you pay a penalty. Before you decide where to park your cash, it’s good to look at the features of each option so you can weigh up the pros and cons and make an informed decision.

What are the typical features of a term deposit?

Compound interest

If the interest for your term deposit is added to the balance regularly, you'll benefit from compound interest, which means you'll earn more. If you only get interest at maturity, you won't have that benefit.

Payment frequency

This refers to the time of interest calculation. For long-term investments, interest is generally paid annually. Some other options are:

  • Annually: paid at the close of 12 months.
  • Semi-annually: you receive this at the close of 6 months.
  • Quarterly: your interest is determined and paid after three months.
  • Monthly: once the month ends, you'll get your interest.
  • Fortnightly: for each fortnight, you'll receive interest.
  • Weekly: receive weekly interest.
  • Maturity: you only receive the interest after it has reached the settlement date known as the maturity date.

Single statement

For those with multiple accounts or term deposits, you may have the option of having one statement to cover everything rather than one for each. This may make it easier to manage all of your accounts.

Partial withdrawal permitted

Some financial institutions allow you access your money in a term deposit without a penalty. Most, however, will charge a fee or interest penalty if you withdraw early.

Auto rollover

If you have this feature, your term deposit, upon reaching maturity, will roll right into a new account. If you don't have this option, you’ll have to inform your bank about what you will do with the money when the term deposit matures. You can transfer it into another fixed term or collect it.

Interest paid to different accounts

Depending on your institution, you could transfer your term deposit into a transaction account without any hassle once it reaches maturity.

Compare term deposit accounts below

Rates last updated January 22nd, 2017
$
3 Mths p.a. 4 Mths p.a. 6 Mths p.a. 12 Mths p.a. 24 Mths p.a. 36 Mths p.a. 48 Mths p.a. 60 Mths p.a. Min Deposit Interest Earned
Bankwest Online Term Deposit
Bankwest Online Term Deposit
2.50% 2.20% 2.70% 2.70% 2.60% 2.60% 2.65% 2.65% $1,000 Open More
St.George Term Deposit
St.George Term Deposit
2.20% 2.00% 2.30% 2.60% 3.10% 3.20% 2.80% 2.95% $1,000 Open More
Bank of Melbourne Term Deposit
Bank of Melbourne Term Deposit
2.20% 2.00% 2.30% 2.60% 3.10% 3.20% 2.80% 2.95% $1,000 Open More
BankSA Term Deposit
BankSA Term Deposit
2.20% 2.00% 2.30% 2.60% 3.10% 3.20% 2.80% 2.95% $1,000 Open More
Westpac Term Deposit
Westpac Term Deposit
2.10% 2.00% 2.20% 2.50% 3.00% 3.10% 2.70% 2.85% $5,000 Open More
Citibank Term Deposit ($75,000)
Citibank Term Deposit ($75,000)
2.50% 2.50% 2.95% 2.35% 2.35% 2.35% 2.35% 2.35% $75,000 Open More

What are the features of online savings accounts?

Online access to your account

Online savings accounts can be accessed via the internet or through phone banking, rather than via a branch. Some newer brands only offer online services, while established banks may offer better interest rates for online-only accounts than for those which can also be managed in a conventional branch.

Minimum deposit requirements

Often these accounts have a minimum balance requirement, and some pay bonus interest if you deposit a minimum amount each month. There are some accounts that pay tiered interest rates (with better rates for higher amounts).

Introductory or promotional interest rates

Online savings accounts sometimes have introductory and promotional rates. Normally after a certain period of time, the promotional and introductory rates revert back to a base rate. Note, interest rates are variable and may move in line with the RBA Cash Rate, so regularly check back to see where your interest rates are at.

Withdrawal limits

Some accounts only let you withdraw money a few times a month without a penalty and others can let you withdraw at-call.

Calculate interest earned on your savings

Launch savings calculator

Compare online savings accounts below

Rates last updated January 22nd, 2017
$
$
months
Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned
ME Online Savings Account
Ongoing, variable 3.05% p.a. rate when you link to a ME Everyday Transaction account and make a weekly purchase with your Debit MasterCard using tap & go. Available on balances up to $250,000.
3.05% 1.30% 1.75% $0 $0 / $0 Open More
ING DIRECT Savings Maximiser
Ongoing, variable 3.00% p.a. when you link to an ING Orange Everyday bank account and deposit $1,000+ each month. Available on balances up to $100,000.
3.00% 1.60% 1.40% $0 $0 / $0 Open More
Bankwest Hero Saver
Ongoing, variable 2.65% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
2.65% 0.01% 2.64% $0 $0 / $0 Open More
ANZ Online Saver
Introductory rate of 2.65% p.a. for 3 months, reverting to 1.25% p.a. Available on the entire balance.
2.65% 1.25% 1.40% $0 $0 / $0 Open More
HSBC Serious Saver
Introductory rate of 2.25% p.a. for 4 months, reverting to a rate of 1.60% p.a. Available on balances below $1,000,000.
2.25% 1.60% 0.65% $0 $0 / $0 Open More

So should I keep my savings at-call?

The best way to answer this question is to compare the features of both a term deposit and online savings accounts. Once you do that, work out which situation will best suit your personal circumstances.

Let's take a look at the case study below:

* Rates correct up to 7 March 2016 and are used purely as examples. 

ME Online Savings AccountBOQ Term Deposit (7 months)
Interest rate (p.a.)3.60%3.05%
Rate conditions
  • Ongoing
  • Variable with conditions
  • Applies up to $250,000
  • Fixed
  • Investment amount $5,000 - $249,999
FlexibilityAvailable at-call without penaltyUnavailable at-call (penalty applies if you wish to withdraw prior to maturity)
Investment amount$5,000$5,000
Interest earned $104.23 $88.40

In this particular example, the saving account would receive $15.83 more in interest, and also offer more flexibility.

Make sure you're aware of the terms and conditions for any term deposit or a savings account. The promotional rate for an online savings account may look attractive, but remember that these will revert to a base rate once that period is over. Term deposit rates vary, and you need to be confident you won't require that money for an emergency.

Compare the features of term deposits and online savings accounts carefully and see what’s the best option for you.

The latest in banking

Clarizza Fernandez

Clarizza is finder.com.au's assistant publisher for banking and investments. She works to empower consumers in making informed decisions on all things banking and investments. In her spare time, she Googles: 'Sydney's best dog parks' and 'Best pasta Sydney.'

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Savings Account Offers

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ME Online Savings Account

Maximum Variable Rate

3.05

Standard Variable Rate

1.30
ING DIRECT Savings Maximiser

Maximum Variable Rate

3.00

Standard Variable Rate

1.60
Bankwest Hero Saver

Maximum Variable Rate

2.65

Standard Variable Rate

0.01
ANZ Progress Saver

Maximum Variable Rate

1.91

Standard Variable Rate

0.01

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