There are two important factors to consider when deciding on a term deposit. The first is the length of term you’re willing to commit to; the second is the amount you wish to deposit.
The length of time and amount of your deposit will determine the fixed-interest rate you receive. With this in mind, you can now compare deals on offer by different banks and financial institutions.
The most common term deposits on offer are three-, six-, 12- and 24-month terms. However, some banks, credit unions and building societies advertise deals for four-, five- and seven-month terms.
Often, these special offers are often only available for a limited period of time and require a minimum or maximum balance.
When considering a seven-month special term deposit, you first need to find out who’s offering one, and the size of the deposit needed. From there, it’s a simple comparison between interest rates.
How is interest paid on a term deposit?
How interest is paid on a term deposit will depend on what you’ve agreed to. Interest on term deposits can be paid on maturity, monthly, quarterly, half-yearly or annually.
The choice of interest payment is often fixed to the term. For example, you might only be able to choose to have your interest paid monthly if you invest for 12 months or more.
However, it’s safe to assume that the longer you leave your interest before it’s paid, the higher the interest rate you’ll receive.
How the interest is paid on a seven-month special term deposit may vary to the standard options, and may not be negotiable at all.
Many term deposit special offers, such as seven-month terms, pay interest only at maturity.
Before you settle on a particular term deposit, it’s worth running a calculation to see what your estimated return will be. There’s a range of online calculators available that provide this function.
The actual value of your return may depend on whether you withdraw money during the term, what frequency you opt for interest to be paid, or whether there are any exit fees or charges.
Can I withdraw money from my term deposit?
There’s no law preventing you from withdrawing your money from a seven-month special term deposit, or any other term deposit, ahead of schedule. If you want to access your money before it matures, it’s likely to incur a penalty and/or administrative fee.
To do this, you would need to provide notice of your intention to withdraw funds from the term deposit. This notice period varies from bank to bank and can be anywhere up to 31 days.
Most banks and financial institutions offering term deposits will outline whether or not the interest rate will be reduced if you withdraw money from your term deposit before it reaches maturity.
A term deposit is a cash investment where your money is invested for an agreed rate of interest over a fixed amount of time, or term.
Before taking out a seven-month special term deposit, be sure that the amount of money you’re prepared to deposit can be off-limits for the agreed time.