Term Deposits Frequently Asked Questions
Compare low interest rate term deposits
What should I know about ING’s business term deposit rates?
ING Direct offers several term deposit options for businesses looking to save over some time.
The business term deposit rates ING offers are compounded annually, meaning that the interest earned after the first year is added to the amount you originally deposited.
During the second year, the interest is calculated on the new amount. If you close the term deposit once it matures, you can ask for the money to be transferred to your business account either with ING or another bank. You can also renew the term deposit and choose to reinvest the total amount earned through the earlier term deposit. Alternatively, you can opt to renew with just the sum you originally deposited, and withdraw the interest earned.
You’ll need to deposit a minimum of $10,000 for at least 90 days if you open a term deposit with ING. In the current low-interest environment*, the annualised interest rate for a 90-day deposit is 0.05 per cent. This means you’d earn $1.25 over a three-month term if you deposit $10,000.
If you opted for a longer time frame, such as two years, you’d get an annualised interest rate of 0.30 per cent on your deposit. If you deposited $10,000, in two years the interest accrued would amount to approximately $60. Again, this is an estimate only based on current rates.
* Rates correct as of January 2021
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.
What is a secured term deposit loan?
A secured term deposit loan is a personal loan that’s secured by a term deposit. To take out a personal loan that’s secured by a term deposit you would need to go through the same bank.
Generally, secured term deposit loans offer a lower rate of interest than standard personal loans. This is because the interest generated by your term deposit offsets the interest applied to the loan.
A secured term deposit or term deposit secured loan enables you to leave your money invested in a term deposit while still being able to make significant cash purchases.
This type of personal loan usually offers many of the same features of a standard loan, including: redraw facility, variable and fixed interest rate options, and the ability to make extra repayments.
Can an international student have a term deposit?
If you’re looking for a steady way to grow your funds as an international student, you might be considering the possibility of a term deposit. Banking for overseas students can be complicated, so you might be wondering, “Can an international student have a term deposit?”
So, can an international student open a term deposit? The answer is yes.
Several banks around Australia offer term deposits to international students. Some banks even have specific accounts and offers designed for those who study overseas.
In general, large banks will offer several options for international students. If you have already opened an account with a bank, it might be best to start by discussing your options with your chosen bank.
What is the best term deposit rate in Australia?
If you’re ready to add a term deposit to your financial strategy, there’s likely one question on your mind: what is the best term deposit rate in Australia?
Unfortunately, there’s no one right answer to this question.
That’s because if you want to find the best term deposit rate in Australia, you first need to understand the nature of interest rates themselves. The financial market is always moving, with interest rates moving up and down and special offers being introduced and withdrawn.
As a result, whatever the best term deposit rate in Australia is today might not be tomorrow.
So to find the best term deposit rate in Australia, it’s best to ignore the past and to instead focus on today’s market. Compare term deposits to find out the current rates and find the right term deposit for you.
How safe is a term deposit?
You may have heard that a term deposit is a type of investment, different to a traditional savings account. All investment comes with inherent risk, so it’s important to know how safe a term deposit is before committing.
Term deposits offer a fixed interest rate which is guaranteed, so you do not have to worry about rising or falling interest rates when investing. You can add up how much interest you will earn over your fixed term, and this will be paid into your account per the conditions of your term deposit.
Term deposits with authorised deposit-taking institutions are also guaranteed for up to $250,000 by the Financial Claims Scheme, so you don’t have to worry about the bank collapsing either.
The only inherent risk of a term deposit is if you may need to break it early. If this happens, you will need to pay a breakage fee and possibly sacrifice some of your interest as a penalty. But if you know you can invest a certain amount of money for a fixed period of time, you can rest assured that a term deposit is a safe investment option.
Are term deposits compounded?
Term deposits can be compounded, depending on what you choose to do with the interest.
There are two ways to receive interest from a term deposit: either a lump sum at maturity; or paid on a regular basis, usually monthly. If you get your interest paid regularly, you can get it paid into a transaction account, or back into the term deposit account. By using this second option, you’re getting interest paid on your interest. In other words, it’s compounding.
Having the money paid into a transaction account means you can access it for your day-to-day spending, while compounding the interest means you get a better overall return on your investment. Both have advantages, depending on your needs, but be aware that some term deposit accounts that pay interest regularly may offer a lower interest rate to offset the effect of compounding.
Can students make term deposits?
If you are a student who has managed to save some money and are looking for a safe investment option, you may be considering a term deposit. Most term deposits (and other bank accounts) are open to anyone who is at least 18 years old.
There are also some term deposits open to younger students, some even without an age limit. These term deposits are usually opened on the student’s behalf, by their parent or guardian.
A term deposit is generally a safe investment option, especially if you want to make sure you can’t touch your savings for a set period of time. If you are 18 or older, shop around for a competitive interest rate before committing. If you are under 18, speak to your parent or guardian to get started.
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.
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.
The latest in term deposit news
Three alternatives to low term deposits
In recent months, banks have been slashing term deposit interest rates dramatically. While term deposits have never been “get rich quick” investments, it’s now much harder to earn a steady income from term deposit interest, which many Australians (such as retirees) have relied upon in the past.