If you’re looking for a relatively low-risk and low-maintenance savings option, a term deposit could be a good choice.
Different term deposits earn interest at different times, such as:
- Annually: 12 months
- Semi-annually: every six months
- Quarterly: every three months
- Monthly: at the end of each month
- Fortnightly: at the end of each fortnight
- Weekly: each week
- Maturity: at the end of the term
Here, we take a look at term deposits with interest paid weekly to help you decide whether this type of term deposit is the right option for you.
What is a term deposit with interest paid weekly?
A term deposit with interest paid weekly means you are paid the interest earned on your balance on a weekly basis.
Depending on the bank or financial institution you choose, you may be able to have interest paid weekly into savings or bank account, as a cheque, or have it added to your balance.
Some people prefer this payment frequency because it allows you to access the returns on your investment on a regular basis.
However, it’s important to note that term deposits with higher payment frequencies (such as interest paid weekly or monthly) often come with a lower interest rate than those with interest paid less frequently.
What types of interest can term deposits earn?
There are two ways interest can be accrued on term deposits:
- Simple interest – Interest is paid only on the money that you have deposited into your account, and not on your account's earnings (interest payments).
- Compound interest – Interest earned is added to your balance on a regular basis. So not only does your original deposit earn interest, your interest earns interest too.
When comparing two term deposits with the same balance, interest rate and payment frequency, a term deposit with compound interest will yield higher returns than a term deposit with simple interest.
How to choose your payment frequency
Choosing how often your paid interest depends on your savings and financial goals. Here are a few points to consider:
- Cash flow – If you need access to cash frequently, interest paid weekly may help you manage your day-to-day finances more effectively.
- Compound interest earnings – If your term deposit earns compound interest, deducting interest payments each week will reduce the total balance you can profit from.
- Interest rate – Typically, term deposits with interest paid weekly come with a lower interest rate than when interest is paid less frequently.
How to find the right term deposit for you
Even minimal differences between term deposits can yield very different financial outcomes, so it’s worth taking the time to weigh up your options before choosing a term deposit.
By comparing term deposits, you can look at important features such as interest rates, payment frequencies, minimum deposit amounts and other factors, to find one that’s suitable for your circumstances.