Can I negotiate a fixed term deposit rate with the bank?
“Can I negotiate a fixed term deposit rate with the bank?” you may be wondering.
Many banks welcome negotiation when it comes to term deposit rates, especially with deposits of over $100,000. Even if your deposit is lower than $100,000, it may be worth a discussion with your bank.
Negotiating with your bank could secure you a higher fixed rate, which will earn you extra interest over your term. You may also discover bonuses or special offers you can acquire through your bank.
Securing the highest interest rate possible is the key to making the most of your term deposit. You may have compared deposits online or discussed your options with a financial adviser, but you also might be wondering about negotiation in order to get a better rate.
What is a term deposit rate?
The term deposit rate is the agreed interest rate for your term deposit. It remains fixed for the term of the deposit.
For example, if you deposit $5,000 for 12 months at a 2.5 per cent term deposit rate, that 2.5 per cent term deposit rate will be fixed for the entire 12 months and won’t change until the term matures.
The term deposit rate is one of the most important factors to consider when comparing your term deposit options. The general rule of thumb is that the longer the term, the higher the term deposit rate.
Term deposits are a popular type of investment because they’re safe and provide reliable returns.
The return you get on your term deposit will be determined by the amount you initially invest, the amount of time you choose to invest it for, and the term deposit rate.
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.
What is a term deposit account in a bank?
A term deposit account in a bank is a type of investment where you lock away a portion of your savings for a fixed period in return for earning a set amount of interest.
Opening a term deposit account in a bank is a safe way to earn a stable return on your investment of cash.
Term deposit accounts can be a good way to give your savings an extra boost without the need to actively watch or manage your funds during the term of the deposit.
Term deposit accounts in a bank are a popular type of investment because they’re safe and there’s very little risk that you could lose your money.
If you make a term deposit of up to $250,000 with an authorised deposit-taking institution, it’s guaranteed by the Australian government, which means there’s virtually no risk of losing your money and you’re guaranteed return.
Interest rates vary depending on the length of the term, the amount you deposit and the bank you choose.
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.
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.
What is a term deposit?
A term deposit is an investment savings account. A term deposit usually pays a higher rate of interest than a regular savings account, with the interest rate fixed for the term (or duration) of the deposit.
You can open a term deposit account for one month or up to five years depending on your investment goal, and invest as little as $500 to start earning a profit.
With a term deposit, you get to decide how much you want to invest (the principal or deposit), for how long (the term or duration) and the frequency of interest payments.
A term deposit represents a secure form of investment, unlike trading in shares or purchasing real estate. And a term deposit up to $250,000 is protected by the government guarantee.
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.