There are term deposits and there are special term deposits, or bank specials. A special term deposit differs from the standard offering, and is advertised as a special available for a limited time.
Most term deposits are for three-, six-, 12- or 24-month periods, and pay a fixed rate of interest that’s paid monthly, quarterly, annually or at maturity (depending on your preference).
But bank specials give you a higher fixed rate of return payable only at maturity. So, for the benefit of earning more interest on your principal, you must not touch it for the term’s duration.
Unlike regular term deposits, bank specials usually have more rigid conditions. First, you must sign up for the offer within a specified period, and deposit the minimum cash investment required.
Some special term deposits are run for two-, four-, five- and seven-month periods. They, too, offer a fixed rate of return, with interest payable on maturity.
The interest rate attached to bank specials can be significantly higher than regular term deposits of a much longer duration.
How do I find term deposit bank specials?
Keep in mind that bank specials on term deposits are not available all year round. And it’s not an exact science being able to predict when a term deposit special will be advertised.
Other than exercising vigilance and regularly trawling the web for a special term deposit offer, you can always refer to a comparison site like RateCity to keep you informed.
Your own banking institution may not offer the best deals on bank specials either, so be prepared to move your money once you’ve discovered a winner.
What are the benefits of term deposit bank specials?
The major benefit of bank specials is that your investment is guaranteed. This is due to the higher interest rate being fixed, the term being non-negotiable and the return paid at maturity.
Investing in bank specials can be a lucrative exercise if you’re a disciplined person. Not withdrawing money during the term means you’ll receive the maximum interest at maturity.
Otherwise, you may be penalised by receiving a much-reduced interest rate than what you originally anticipated when you signed up for the bank special.
Another way to use bank specials to your advantage is by moving your principal from one bank special to another at the conclusion of each term.
It does require effort on your part, particularly around the application process and managing the transference of cash between new accounts.
The end goal – as with all term deposits – is to earn as much interest as possible on your principal. And the difference of even one per cent interest can help to grow your nest egg much quicker.
So, if you can afford to have a large sum of money tied up in bank specials, you might be financially better off in the long run.