Term Deposits
Are term deposits safe as houses?
If you’re saving for a home loan deposit, a term deposit could be a smart place to park your spare cash.
180 day term deposits
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Product | Max rate | Min. deposit | Company | Interest rate | Next rate increased | Features | Go to site | |
|---|---|---|---|---|---|---|---|---|
2.00% p.a for 3 months | $250,000 |  Term Deposit ($250k+) | 2.00% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.70% p.a for 3 months | $1,000 |  Term Deposit | 1.70% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.60% p.a for 5 months | $1,000 | Green Term Deposit | 1.15% p.a for 2 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.60% p.a for 7 months | $5,000 |  Advance Notice Term Deposit | 1.45% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.25% p.a for 60 months | $5,000 | Term Deposit | 0.85% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details |
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A term deposit is a sum of cash you can invest in a financial institution like a bank, building society or credit union. It’s really like a savings account where you lock your cash away so you don’t dip into it while it earns interest.
You invest your money for a fixed amount of time on a guaranteed interest rate. At the end of the term, you can withdraw your money, including the interest earnt. Carefully consider how long you want your money tied up, because there is usually a financial penalty if you take it out early.
Term deposits may be an appropriate option if you are looking for a set return on your investment. You will avoid the insecurity of the fluctuating share market; it’s also a safeguard against a falling cash rate.
Australian financial institutions offer term deposits that start from as short as 30 days and can run as long as five years.
What is a 180-day term deposit?
If you choose a 180-day term deposit, your money will be held with the financial institution for 180 days, or almost half a year. At the end of that time, your money will be returned to you with interest.
Who offers 180-day term deposits?
Banks, building societies and credit unions offer 180-day term deposits.
You might want to choose from an authorised deposit-taking institution. ADIs are subject to prudent standards and must meet certain criteria. It’s also important to note that some providers may require a minimum amount of cash to be deposited.
Make sure you consider all the options and compare the different products. Thankfully, RateCity has done considerable research for you. You can use RateCity’s handy term deposit calculator to see exactly how much interest you’ll earn during your 180-day term deposit.
How do I open a term deposit?
It’s common now for financial institutions to let you apply for a term deposit online or over the phone. You’ll need to prove your identity and date of birth with either a driver’s licence, passport or birth certificate. You may also be asked to verify your residential address. Some providers offer electronic verification for online applications, or you might be asked to go into a branch.
Picking the right product for you
A term deposit is a really effective way to boost your savings, but be sure you read the product disclosure statement (PDS). As well as looking for a suitable interest rate, it’s also important you know any possible penalties and fees that may apply. These do vary a lot between financial institutions.
In Australia, we have what’s called the Financial Claims Scheme. Under the scheme, the government guarantees deposits of up to $250,000 at ADIs, in the event that the institution collapses. This makes a term deposit a safe investment.
Nick Bendel is RateCity’s property and personal finance editor, and covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Smart Property Investment, Elite Agent, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.
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What is a fixed term deposit?
A fixed term deposit is a safe and stable way to earn a fixed return on your cash investment.
Fixed term deposits are essentially bank accounts where you lock your money away for a fixed period and earn a fixed interest rate on those funds.
Fixed term deposits can be both short term, which is usually anything under 12 months, or long term, which can be up to 10 years.
Once the fixed term has ended, the bank or financial institution will give you back your initial deposit plus any interest you earn during the fixed term period.
Depending on the type of fixed term deposit account you open, when the term matures, you may have the option of rolling the funds over for a new term or withdrawing the funds.
Unlike other savings or transaction accounts which offer variable interest rates and flexible features, fixed term deposits offer fixed interest rates, which means the amount of interest you earn will remain the same during the term of the deposit.
Are term deposits covered by the Australian government guarantee?
Yes, term deposits are covered by the Australian government guarantee.
Under the Financial Claims Scheme, the Australian government guarantees term deposits up to $250,000, capped at one person, per financial institution.
This means that your term deposit (if it’s $250,000 or less) is protected in the unlikely event the bank, building society or credit union collapses.
If you have more than $250,000 in a term deposit with one the one bank, for example, then only up to $250,000 of your principal is covered.
If you’ve got more than $250,000 and you wish to invest in a term deposit, you could consider dividing your money between term deposits and banks (limiting each deposit to $250,000 per bank).
That way all of your deposits are protected by the Australian government guarantee and you will not suffer any financial losses.
What is the best interest rate for a fixed term deposit?
The best interest rate for a fixed term deposit changes all the time, as interest rates move up and down and banks compete with each other to win market share.
To find the best interest rate for a fixed term deposit, it’s helpful to understand how interest rates are applied to term deposits.
There are three factors that determine the fixed interest of term deposits:
- The size of your deposit
- The duration of the term
- The frequency of interest paid
Term deposits vary in duration from one month to five years or more. Interest rates generally work on a sliding scale; shorter terms get a lower rate, longer terms get a higher rate.
Here are a couple of examples of how interest is applied to term deposits.
- A $10,000 term deposit taken out over 12 months, with interest paid at maturity, might receive a fixed interest rate of 2.20 per cent.
- A $10,000 fixed term deposit taken out over 12 months, with interest paid quarterly, might receive a fixed interest rate of 2.00 per cent.
Using the size of your deposit, the duration of the term and how often you want to be paid interest, you can shop around for the best interest rate for a fixed term deposit.
Which bank has the best term deposit rates?
If you’ve been shopping around for a term deposit, you might be wondering which bank has the best term deposit rates.
Term deposit rates will generally be affected by the amount you choose to deposit and whether you opt for a short or long term deposit.
Longer term deposits tend to have higher interest rates than shorter terms. The trade-off for earning a higher interest rate on your term deposit is that you can’t access your funds for the duration of the term deposit.
When comparing which bank has the best term deposit rates, it pays to do your research and compare how your funds will fare over the short and long term.
Unlike home loans or savings accounts which give you the option of fixed or variable rates, term deposits are always fixed, which means you get a guaranteed amount of interest over the term of the deposit.
How do you break a term deposit?
If you have found yourself in sudden need of funds, you may be wondering how to break your term deposit and access your savings.
If you need to break your term deposit, your first step should be to check the terms and conditions with your bank or provider. Many banks now require 31 days’ notice before you can access the funds in your term deposit, so in many cases you should first notify your bank that you will be breaking the term.
Once you have notified the bank and know when you will have access to your funds, you will then be liable to pay a breakage fee. Check with your provider to see how much this fee will be. You may also need to sacrifice a percentage of your interest as a penalty for breaking the term early.
Once you know when you will have access to your funds, and how much you will need to pay to do so, you are in a good position to decide whether you want to break your term deposit.
How do term deposits work?
Term deposits are flexible, low-risk, and earn you interest over time. But before you apply to open a term deposit, you might be wondering: how do term deposits work?
A term deposit is an agreement you make with a financial institution. This agreement will specify a certain amount of money that you will give the bank for a certain amount of time. In return, you’ll earn a fixed amount of interest on your deposit throughout your term.
Term deposits work as an exchange between a financial institution and an individual. You can think of your term deposit as a loan to the bank. Because you’ve loaned the bank your money, they’re willing to pay you interest on your deposit.
Can you take a term deposit out early?
If you are considering a term deposit, you may be wondering if you can take out your money early. It is possible to break a term deposit, but it will cost you both time and money.
Many banks require 31 days’ notice if you wish to break a term deposit. This means that if you need money urgently for an unexpected expense, it may not be worth breaking your term deposit. Make sure to read the fine print to see if this wait period applies to the term deposit you are considering.
You will also most likely need to pay a breakage fee in order to access your funds, and you may also incur a reduced amount of interest. All of this information – including the fee amounts – should be available in the term deposit product disclosure statement (PDS), so ensure that you read the fine print before committing.
What is a short term deposit?
Sometimes you only want to tie up your money for a short period, maybe because you want to make a quick return on a large sum, or just to have more flexibility and access to your money. That’s where a short term deposit can come in.
Short term deposits are usually less than 12 months (e.g. 30 days, 90 days, six months or 12 months), though you will still not be able to access your money for the length of the term without incurring a penalty fee.
At the end of the term, you can roll your deposit over, or you can withdraw it. An advantage of short term deposits is that you can take advantage of higher interest rates with a different financial institution, if they are available.
Can I break a term deposit?
One of the main components of a term deposit is your agreement that you won’t access your money until your term has expired. However, life can hand us unexpected expenses, and you might be asking yourself, “Can I break a term deposit?”
In most cases, you are able to withdraw money early from your term deposit, but it will usually come with a penalty. The penalty amount will vary from bank to bank, which is why it’s important to understand your deposit’s early withdrawal policy.
You should also be aware that some financial institutions enforce a waiting period for early withdrawals. This waiting period is typically up to 31 days and commences after you submit a request to withdraw your funds.