When selecting a term deposit, it’s important to read the product disclosure statement, so you know all the terms and conditions that come with the deposit. Some of the key features to look out for include:
There are two main types of term deposits – short-term and long-term. Their appropriateness depends on your personal objectives for your savings. Short-term deposits are usually for a period of less than a year and as little as a month. If you have a short-term goal such as saving for a holiday, this type of term deposit could be a good option.
Long-term deposits are typically for saving over more than a year and up to five years (or even seven years in some cases). This type of term deposit could be suitable if you have a more significant savings goal or want to take advantage of a higher interest rate.
The interest rate you agree on at the start of the term will determine how much of a profit you make off your deposit, so it pays to do some research and look at all your options.
Keep in mind that the longer you keep your money in the bank and the more money you can deposit, the higher the interest rate will tend to be.
Term deposits are a competitive financial product amongst savers due to their having fewer fees than most savings accounts or even bank accounts. The biggest fee you may face is a break fee if you try to make an early withdrawal and leave the term deposit fixed term early. Keep this in mind if you plan on withdrawing your funds before the agreed upon period of time.
Many term deposit accounts offer automatic rollovers. Unless you notify the provider within a set period of time (often 30 days notice before the end of the term deposit period), your funds may rollover into a new term deposit fixed period. For example, if you locked away your funds for 12 months, your provider would roll your money and interest earned into a new 12-month term deposit.
This feature can have its advantages though, as some providers offer bonus interest for account holders who allow their funds to rollover into a new term. Ensure you measure the appropriateness of this by comparing interest rates from other providers before locking your funds away again.