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What is a term deposit?

You love your cash and have worked hard for it, so why would you want to lock it away?

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. And thanks to new tools like PayPass and Apple Pay, we don’t even need to visit an ATM. A term deposit could be an ideal investment option for you as it takes your cash and locks it away.

What is a term deposit?

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. You determine the amount of money you deposit and the length of the term when you open the account. You can deposit anywhere from $1,000 to $100,000 for several months or years at a time. Depending on which account you choose, you may earn a fixed interest rate on your money either monthly, yearly, half-yearly, quarterly or when the term is over. Unlike other investments, thanks to the fixed interest rate, your investment will be immune to fluctuations in the market. It is important to remember that you cannot access your money until the full term is over. Some lenders may allow you to do so, but you will pay a hefty fee or forfeit all the interest you’ve earned.

Why choose a term deposit over a savings account?

There are several differences between a savings account and a term deposit. The primary difference comes down to your ability to access your money. With a savings account, you can but with a term deposit, you can’t. A term deposit is a good option for people who want to save, but keep finding themselves tapping into their savings account for day-to-day items. A term deposit forces you to save that money because you can’t access it.

Another major benefit of a term deposit is the fixed interest rate. Most savings accounts have a variable interest rate, meaning they can change at any time. Therefore, if you’re enjoying a fixed interest rate of 2.5% on your term deposit and the lender lowers their interest rates, your term deposit won’t be affected but your savings account may be. However, this also works the other way, and can mean you miss out should your bank choose to raise interest rates instead.

Key term deposit definitions

Length of term

This refers to the amount of time the bank will hold your money in the account. You decide on the length of the term when you open the account.

Variable rate

This means the interest rate can change at any time. It can go up (meaning you will earn more interest) or down (meaning you will earn less interest).

Fixed rate

This means the interest rate at the time you open the account will stay the same for the full length of your term. Term deposits always have a fixed interest rate.

Deposit

This is the initial amount of money you wish to hold in the term deposit.

Auto rollover

If your term deposit has this feature, your money will roll into another term deposit account when the term is over. This may not be ideal, as the new account may not offer the same interest rate as your original account, and therefore, may not be suited your needs. Before your account reaches maturity, you should notify your institution of what you wish to do with the money in your account.

Maturity

This refers to the end of your term. When the term is over, your account has reached maturity.

How can I compare term deposits?

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

Rates last updated June 24th, 2018
$
Name Product 3 Mths p.a. 4 Mths p.a. 6 Mths p.a. 12 Mths p.a. 24 Mths p.a. 36 Mths p.a. Min Deposit Interest Earned
Citibank Term Deposit
2.60%
-
2.80%
3.00%
-
-
$100,000
Firstmac Term Deposit
2.55%
-
2.75%
2.65%
2.75%
-
$5,000
UBank Term Deposit Account
2.60%
2.70%
2.75%
2.64%
-
-
$1,000
RaboDirect Term Deposit
2.30%
-
2.50%
2.50%
2.70%
2.90%
$1,000
MyState Bank Online Term Deposit
2.55%
2.35%
2.76%
2.75%
2.80%
-
$5,000
BCU Term Deposit
1.25%
0.71%
1.40%
1.45%
2.55%
1.80%
$1,000
Bankwest Online Term Deposit
2.35%
1.50%
2.60%
2.65%
2.60%
2.60%
$1,000

Compare up to 4 providers

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Important Information*
RaboDirect High Interest Savings Account

Maximum Variable Rate

3.05

Standard Variable Rate

1.80
Bankwest Hero Saver

Maximum Variable Rate

2.60

Standard Variable Rate

0.01
Bank Australia Bonus Saver Account

Maximum Variable Rate

2.60

Standard Variable Rate

0.15
Citibank Online Saver

Maximum Variable Rate

2.85

Standard Variable Rate

1.70

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