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Long-term deposits versus short-term deposits

So you’re sold on the idea of a term deposit, but what's the optimal amount of time to lock your funds away for?

Long-term deposit

A long-term deposit usually means a term that is over 12 months in length. The main advantage to long-term deposits is they generally have a better interest rate. Typically, the longer amount of time you commit to, the better rate you will receive from the lender. This is a reward for letting them hold onto your money for a long period of time. Long-term deposits require less maintenance as they allow you to set and forget, which is a quality many people look for in an investment.

Short-term deposit

Deposits that are locked in for 1-12 months are usually considered short term. The benefit of short-term deposits is, as the name suggests, they are short term. Many people will not be comfortable knowing they cannot access that money for several years. If you end up with a large unexpected cost, and the bulk of your money is locked away, you could run into financial trouble. Also, when the term ends, you have the opportunity to shop around the market for a better rate, whereas with a long-term deposit you need to wait it out. Some banks may offer you a loyalty bonus if you roll over your term deposit when the term ends.

Which term deposit suits you best?

If you have a short-term savings goal, a short-term deposit may be your best choice. For example, if you’re planning to go on an overseas trip in 12 months or need to purchase a car next year, a short-term deposit is a good way to make sure you don’t spend your money in the interim. It is also suited for first-time investors, who may be nervous about committing to anything long term or who may not have other forms of equity or assets to bail them out in an emergency. Long-term deposits are suited to people who may have more cash or assets and are more comfortable with locking some of it away for a few years. If an emergency comes up, they know they will have access to enough money to deal with it. It is also suited for people who are looking for a long-term investment strategy, and already have, or a planning to have, a diversified investment portfolio.

Term Deposit Offer

Citibank Term Deposit

2.70 % p.a.

fixed for 6 months

Term Deposit Offer

Enjoy a competitive interest rate and guaranteed returns on balances from $75,000 with a Citibank Term Deposit Account. Plus, pay no account keeping fees.

  • Minimum investment: $75,000.00
  • Monthly fees: $0.00
  • Interest payment options: monthly, quarterly, annually or at maturity
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How can I compare term deposits?

If you’ve decided what length term deposit best suits your savings needs, the next step is to compare the term deposits available.

Rates last updated February 24th, 2018
$
Name Product 3 Mths p.a. 4 Mths p.a. 6 Mths p.a. 9 Mths p.a. 12 Mths p.a. 24 Mths p.a. Min Deposit Interest Earned
Citibank Term Deposit
-
-
2.70%
-
-
-
$75,000
Citibank Term Deposit $250,000+
-
-
2.98%
-
-
-
$250,000
St.George Term Deposit
2.05%
1.85%
2.15%
1.90%
2.45%
2.50%
$1,000
BankSA Term Deposit
2.05%
1.85%
2.15%
1.90%
2.45%
2.50%
$1,000
Westpac Term Deposit
2.00%
1.85%
2.05%
1.90%
2.30%
2.40%
$5,000
Bank of Melbourne Term Deposit
2.05%
1.85%
2.15%
1.90%
2.45%
2.50%
$1,000

Compare up to 4 providers

You may also be interested in

What is a term deposit?

What is a term deposit?

Saving for a house, holiday, car or simply a rainy day can be tough, especially when your cash is so readily available. You can now spend your cash more effortlessly than ever before. A term deposit is a relatively risk-free investment option that enables you to invest your money for a set period of time, allowing your balance to grow by accumulating interest. Read more…

Picture: Shutterstock

Alison Banney

Alison Banney is the Senior Banking and Investment Writer for finder.com.au. She has worked in the content team for one of Australia's biggest banks, and is determined to help more Australians get excited about their finances through the use of clever content.

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