With so many options to sift through, finding the best term deposit rate for your situation can seem difficult.
Many investors often assume that when it comes to saving money in a term deposit, the longer you fix your lump sum, the better the rate. And that is often the case for the major four bank's best term deposit rates.
Longer is not always better
Despite this, it's the shorter terms, such as three-month term deposits, that are often the most popular with Australians. This may be because shorter term deposits offer investors greater flexibility and access to their savings, particularly those who wish to assess the market frequently and want to avoid costly exit fees.
However, by looking beyond the big four banks, customers can find great rates on shorter term deposits too. For instance, some small financial institutions offer higher rates of interest on their short term deposits than the big banks do for their long term deposits for the same lump sum. The big banks also sometimes run 'specials' where they offer higher than usual rates, which can prove popular.
So clearly, it pays to shop around for some of the best term deposit rates. You can do this at comparison sites such as RateCity, where you will find a list of providers' rates broken down by terms.
The benefits of a term deposit
Some of the benefits of using a term deposit include:
- There's minimal risk of losing your money (see point 4)
- You earn a rate of return that's usually higher than a regular transaction account
- The interest rate will not change over the term you select
- Term deposits placed in an Authorised Deposit-taking Institution (ADI), of up to $1 million, are guaranteed by the Government
The best term deposit rates vary, depending on the wholesale or 'money market' rate movements, so shop around for a deal that suits you.