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Term Deposit Interest

Term Deposit Interest

The main feature of a term deposit is the interest you get paid at the conclusion of the term. The term deposit interest you get paid is governed by the length of time you are willing to put your money away for, and the amount of money you are able to invest.

It’s not always the case that a longer term automatically equals higher term deposit interest rates. Financial institutions use term deposit interest rates as a way to attract particular lengths of investment to help their overall financial situation.

For example, they might decide they need more money invested for a period of six months rather than one year, so they might in fact offer higher term deposit interest rates for the shorter term.

Term deposit interest is generally only paid once, at the conclusion – or maturity – of the term. Some term deposit accounts credit your interest more often, but most don’t. That means if you invest $50,000 for six months at a term deposit interest rate of six percent, you will receive approximately $1500 of interest paid at the conclusion of the six month term.

To check whether your best term deposit interest rate is competitive, you will need to compare your term deposit to other products in the market. This can be easily done at financial comparison websites like RateCity, where you input the amount of money and the term you’re willing to invest for. You will then see a list of accounts ranked by the term deposit interest rate they pay for that amount and term.

The table below displays some of today’s highest interest rates for 1 year term deposits.

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Learn more about term deposits

How long is a term deposit?

A term deposit refers to when you lock your money in an account for a certain period of time and at a specified interest rate. You will not be able to access your money for the length of the agreed term without incurring a penalty fee.

A long term deposit generally refers to a term deposit that lasts for more than 12 months – which in some cases may be as long as 10 years.

Usually, the longer you store your money, the better the interest rate you’ll get, so a long term deposit will tend to pay higher interest than a short term deposit.

At the end of the term, you can roll over the money (plus the interest you’ve made during the term), or you can withdraw it all.

How do you calculate term deposit interest?

If you’re ready to open a term deposit, there’s a lot you’ve already figured out. You’ve decided on the length of your term and found the best interest rate, but there’s something you still might be wondering. How do you calculate term deposit interest?

One of the easiest ways to calculate term deposit interest is by using a term deposits calculator. However, you can also estimate your total earnings on your own.

A fixed interest rate signifies what percentage of your original balance your term deposit will earn annually. For example, a deposit of $1,000 at an interest rate of 3 per cent will earn three per cent of $1,000 annually – meaning you’ll earn $30 of interest each year.

You can estimate your interest using three variables. Multiply together your deposit amount, interest rate, and term length and you’ll approximate the interest a deposit will earn. For example, if you invest in a term deposit for $5,000 at an interest rate of 3 per cent for two years, your interest would total $300.

How often do term deposit rates change?

One of the advantages of a term deposit is that this type of investment enjoys a fixed interest rate. This means that the interest rate that you have signed up for will not change during the period of your term deposit, regardless of rising or falling market interest rates.

However, it is important to be aware of the end of your term deposit. Once your term ends, whether this is in three months or three years, many banks will default to rolling over your deposit into a new term, sometimes with a lower interest rate. Once your term deposit rolls over, you will then be locked into this new fixed interest rate for another term.

Make sure to use the grace period at the end of your term to your advantage. Shop around for a competitive interest rate and reinvest your money accordingly.

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.