Term Deposit Deals

Term deposits are one of the lowest-risk options when it comes to investing your money. Whatever your personal objectives are, when it comes to choosing a new term deposit provider, you may be wondering – what else can they offer me to get me through the door?

Let’s look at what you need to know about term deposit deals and how to find the best term deposit for your financial situation.

When it comes to term deposit deals, there isn’t the same wide range of rewards and perks offered for more competitive financial products, such as home loans or credit cards.

This is because there is less incentive for a provider to offer them, as term deposits earn the account holder interest versus home loans or credit cards, which earn the provider interest. A home loan lender, for example, would rather entice new customers with cash back offers as the interest and fees charged on home loans are a significant percentage of their income.

A handful of term deposit providers do offer one enticing perk to bring in new customers: loyalty bonuses. At the end of the term, some providers will offer customers a higher interest rate than their previous one if they automatically rollover the account. This bonus interest offer is not common, so keep an eye out for providers that do allow this.

When it comes to choosing a safe place to store your money and earn a return via interest, a term deposit may be a competitive choice for some Australians.

• Lock in your rate

A term deposit allows you to lock away your nest egg at a fixed rate of interest for a set period of time. A short-term deposit may be 3 – 12 months and a longer-term deposit may be 12 months to 5 years. Like a savings account, you will earn a return on your original deposit via the term deposit interest rate offered. However, the interest rate is fixed – so you are guaranteed a certain return over the fixed period. Unlike savings accounts, this will not fluctuate, even if your provider slashes variable interest rates or the Reserve Bank of Australia cuts the cash rate.

• Rollover your term

A handy feature offered by some term deposit providers automatic rollover allows account holders to automatically start a new term for the same fixed period at term deposit maturity. The rollover term may be less competitive than if you switched to a new provider. However, some providers will offer competitive deals in which account holders who opt for the rollover earn a higher interest rate on their next term.

• Low maintenance

Term deposits are favourable for those who prefer to set-and-forget their investments, as there is very little upkeep required. You generally don’t need to pay ongoing fees, make regular deposits or meet minimum investments, keep your balance at a certain amount or meet any other common requirements of high interest savings accounts. Once you’ve opened the term deposit, there’s nothing you really need to do but wait until it has matured. Your term deposit may also be linked to your bank account or savings account, so you can easily transfer your matured funds if you choose to close your account. 

• Less temptation

If you’re the type of saver who constantly dips into their rainy-day fund, a term deposit may be helpful in thwarting those temptations. Term deposit providers will often sting savers for early withdrawal before the maturity date with a penalty fee. And it’s not an immediate process, unlike a savings account. If you need to access the funds in your term deposit early, you will generally need to provide 31 days’ notice. Further, you will need to wait until maturity anyways if there is less than 31 days until the account matures.

• Government guarantee

Term deposits are considered a low-risk investment option for a number of reasons. One of which is that they are backed by the Australian government guarantee under the Financial Claims Scheme. This government guarantee means that in the event a bank, building society or credit union collapses, deposit products with authorised deposit-taking institutions are guaranteed up to $250,000. If you have more than $250,000 you’d like to invest you may want to consider dividing these funds into multiple accounts with multiple deposit-taking institutions, as it is capped at one per provider.

Just because there isn’t cash back or rewards points on offer by providers to get you through the door, doesn’t mean you can’t still get your best term deposit deal.

What one account holder classifies as the best term deposit deal will typically differ from another, and that is why it pays to do your own research. But generally, a competitive term deposit offers the following:

• A higher than average term deposit rate;
• A fixed term length that suits you; and
• A minimum deposit amount that works with your budget.

You’ll also want to identify how the interest payment frequency is compounded: monthly, quarterly, half-yearly, annually or at maturity. The more frequently interest is compounding, the greater your rate of return will be. Keep in mind that due to this, providers typically reserve their highest rates for their least-frequently-compounded interest offers. In the end it’s a balancing act for the term deposit account holder.

Once you’ve identified exactly what features of a term deposit make up your ideal pick, you can then begin your comparison.

Some of the easiest ways to compare term deposits and nab your best deal is to use comparison tools, such as tables and calculators.

Comparison tables allow savers to compare apples with apples. Using filters, you can narrow down your search within the Australian market to create a term deposit short list. Enter your minimum deposit and ideal term to find better-suited options. Then, using the table categories you can easily view the maximum rate offered, minimum deposit required and any helpful features.

A term deposit calculator helps savers to go further with their comparison by calculating which options will provide the highest yield. Enter your deposit amount, the savings duration (term) and interest rates on offer to see what your final balance would be with interest payments at the end of the fixed term.