If you have a savings goals that you are working towards it may be worth weighing up the benefits of a term deposit or savings account to see where you can get the highest interest.
So when term deposits are pitted against savings accounts, which one comes out on top with the highest rates and best features?
Comparing an amount of $5000 placed into a savings account for two years the current highest interest rate on a savings account is 3.75 per cent offered by BCU but only if you meet the required conditions.
In fact all the highest interest rates offered n savings account require you to comply with restrictions in order to earn the bonus rate. These could be anything from making weekly deposits, not taking money out of the account or having a transaction account with the account provider that’s linked to the savings account.
Another issue with the savings account approach is that interest rates can be changed by the provider at any time so potentially you could go through the process of opening a savings and transaction account with a bank only to find that the great interest rate you signed up for is gone in a year.
On the positive side, savings accounts can reward you with interest increases when rates are on the rise, boosting your savings potential.
On the other hand, if you can commit to tying up your $5000 in a term deposit for two years the highest interest rate you can get at the moment is 3.35 per cent with CUA. This rate is guaranteed for the two years that your money is in there.
Term deposits skip the hassles by being relatively low maintenance; simply wait for your investment to mature and decide whether to withdraw or roll it over. The downside to this that if you need your funds urgently, you will have to pay penalty fees or sacrifice your high rates to withdraw.
Savings products can seem as similar as "po-tay-toes" and "po-tah-tos", so whether you prefer high-interest term deposits or online savings accounts, compare both at RateCity to see which product is best for your money.