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Term deposits vs online savings accounts

Jan 082013
 
 Posted by on 20/06/2014

what-is-a-term-deposit-1With promotional interest rates for online savings accounts up in lights at the moment, it’s understandable that some people may question whether term deposits are still the best savings option. The overriding factor favouring term deposits is the rate certainty they give you. Rates can go up or down at any time but a term deposit locks you in to your chosen rate for your chosen term.

PROS

TERM DEPOSITS

  • Certainty of interest rate received, regardless of rates falling in meantime.
  • Savings locked away from spending temptation.

ONLINE SAVINGS ACCOUNT

  • Can sometimes offer higher interest rates.
  • Money available for use at any time.
  • No minimum deposit amount required
  • No need to go to branch, can manage account entirely online.
  • Interest Compounds

CONS

TERM DEPOSITS

  • Savings locked in at lower rate, should interest rates go up.
  • Penalty applies if emergency access to money is needed.
  • Minimum deposit required – $1,000 – $10,000.
  • Simple Interest

ONLINE SAVINGS ACCOUNT

  • Uncertainty about the rate in the future.
  • Easy access can mean money is spent not saved.

Back to Term Deposits.


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