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Canstar News - May 18th
Commonwealth Bank made cuts of up to 0.20 percentage points to a range of smaller terms, effective today, but its 11-month deposit rate escaped the cuts and instead grew by 0.05 percentage points for balances over...– Read more
Canstar News - May 5th
The Reserve Bank of Australia board met today for its usual monthly monetary policy meeting, where it also now considers how it could further support the economy during the financial fallout of the coronavirus pandemic. The...– Read more
A term deposit is an investment of cash placed with a financial institution for a fixed period of time, known as the term, with a fixed interest rate for your return at the end of the term. A term deposit is commonly referred to as a TD, but can also be known as a certificate of deposit or CD.
Fixed terms can range from 1 month to 5 years and the money can usually only be withdrawn at the end of the term.
‘Advance notice’ term deposits allow you to withdraw the money earlier if you pay a penalty fee and give advance notice of 31 days. You may receive a slightly higher interest rate for an advance notice term deposit than for a standard term deposit.
Term deposits are popular for use by investors who prefer receiving a set return instead of anxiously watching the daily fluctuations of the share market. Other investors use term deposits as just one part of their investment portfolio.
Applying for a term deposit is essentially the same as applying for a normal savings bank account, and most applications can be made online these days.
CANSTAR compares term deposits using a sophisticated rating methodology that takes into account both the fees and features of the product. We compare each term deposit and then rate it out of 5, with a 5-star rated product offering outstanding features and value.
Some of the features you should look for when comparing term deposits include:
And as always, be sure to read the product discourse statement (PDS) so you know what you’re signing up for!
You can compare term deposits based on your own financial requirements using the comparison selector tool at the top of this page:
Written by: TJ Ryan and Tim Smith
Please note that these are a general explanation of the meaning of terms used in relation to term deposits. Your bank or financial institution may use different terms, and you should read the product disclosure statement (PDS) of your policy carefully to understand everything that may apply during your investment term. You cannot rely on these terms in relation to any term deposit you may purchase.
What is a advance notice term deposit?
A advance notice term deposit is a term deposit where the institution allows you to withdraw the money earlier than the end of the term, if you pay a penalty fee and give advance notice of 31 days. Advance notice term deposits often have a slightly higher interest rate than standard term deposits.
What are basis points?
Basis points is a unit of measurement used in financial situations to describe the percentage change in interest rates or the value of a financial product. One basis point is 0.01%.
What is a cooling-off period?
A cooling-off period defines the number of days available for the investor to change the investment term or amount of money invested in the term deposit. The number of days will be specified in the PDS and the term deposit contract.
What is a coupon payment?
A coupon payment is a portion of a bond, entitling the holder to receive a payment of interest. For example, a 10% coupon paid semi-annually would yield two 5% interest payments.
What is a debenture?
A debenture is a medium- to long-term investment issued by a company when you lend money to that company. In return for your investment, you receive a regular and fixed amount of interest for the term of the investment. The invested funds (principal) are repaid at the end of the term (maturity).
What is interest paid?
Interest paid is the amount of simple interest paid on the principal amount (the initial amount of money placed in the term deposit). For example, a term deposit paying 6% interest per annum would pay 6% of the sum invested at the end of a 12-month term, or 3% at the end of a 6-month term.
What is laddering?
Laddering is a method of investing in term deposits. The investor puts some of their money in a long-term deposit and the rest in several short-term deposits that renew regularly.
What is maximum term?
Maximum term is the maximum amount of time that you can receive a certain interest rate on a term deposit.
What does it mean by maturity?
Maturity is the time at which the term deposit will expire and stop accumulating interest. Also known as the ‘end of term’.
What is a minimum term?
Minimum term is the minimum amount of time that you can receive a certain interest rate on a term deposit.
What does TD stand for?
TD stands for term deposit.
What is a term?
A term is the length of time or duration a term deposit will run for.
What is a yield?
A yield is the rate of return earned on an investment.
Below are some of our popular term deposit providers:
For more information on how CANSTAR rates term deposits, read our latest star ratings report.