Most advertised term deposits offer a fixed rate of interest based on the length of the term, rather than the size of the deposit.
In other words, whether you invest $5,000 or $1 million in, say, a one-year term deposit, the interest rate will often be the same.
There are some term deposits with a maximum cash limit that you can invest. This might rule you out if you have a deposit of over $1 million. For term deposits that accept larger investments, you may not have the choice of when interest is paid.
Deals offering term deposit specials (or higher interest for a limited time) may not accept deposits over $1 million.
If you have more than $1 million that you’re looking to invest in a term deposit, it’s advisable that you find out what published products are available and speak to each bank individually.
A larger deposit doesn’t rule you out of investing in a term deposit; rather, it potentially gives you more bargaining power when negotiating the best deal.
Does the government guarantee cover my term deposit?
Under the federal government’s Financial Claims Scheme (FCS), deposits are protected up to $250,000 for each account holder at each bank, building society or credit union, including deposits with any other banking businesses they operate under a different trading name.
If you hold deposits with the same licensed banking institution that are over the $250,000 FCS limit, the excess amount over $250,000 will not be protected under the FCS but may be claimed in any subsequent liquidation process.
It’s your choice whether you want to spread your cash investment across a number of different term deposits. Taking this action may reduce the risk of financial loss and/or litigation.
What impacts the interest rate for a term deposit?
The fixed interest rate you secure for your term deposit will depend on how you want your interest paid. From the outset, you could opt for monthly, quarterly, half-yearly, annually or at maturity.
The more frequently you want interest paid, the lower the rate (generally) than if you waited until maturity, or the end of the term.
Factors that may reduce the interest payable include withdrawals made prior to maturity, or early termination of the term deposit.
And if, once your term deposit matures, you chose to invest any of those funds for a new term, a different rate might then apply to that new term.
Where can I apply for a term deposit?
You can apply for most types of term deposits online in as little as 10 minutes. However, in some cases for larger investments, such as over $1 million, you might be required to visit a branch and apply in person.
Interest rates for larger term deposit investments may not be published by the bank, building society or credit union. This is also something that would need to be discussed in person at a branch.