In some situations, term deposits can be a safe and reliable way to grow wealth over a pre-determined period of time, as they are designed to guarantee you a set rate of interest earnings on your deposit. With a term deposit, the interest rate you receive is locked in at the time you make your deposit.
On the other hand, term deposits can be inflexible, as they don’t always allow you to add extra funds. Your provider may also require you to give a period of notice if you wish to make a withdrawal, which can also attract an early withdrawal fee.
Term deposit interest rates tend to vary a lot between providers and are subject to frequent changes. With movements in both directions possible, it can pay to consider shopping around, but where do you start?
Luckily for would-be term deposit investors, Canstar collects information on term deposit rates from over 60 different institutions.
The following table displays a snapshot of term deposits with a term range between 11-24 months with interest paid as specified. This is based on an investment of $50,000 in a personal term deposit and is sorted by the highest advertised rate for a 12-month term, and finally by shortest payment frequency. For more information and to confirm whether a particular product will be suitable for you, check upfront with your provider and read the Product Disclosure Statement before making a decision.
|Company||Interest Payment Frequency and Features||11 months||12 months||13 months||15 months||18 months||24 months|
|Australian Military Bank||Investment Plus | Paid end of term||–||1.40%||–||–||–||–|
|Judo Bank||Personal Term Deposit | Paid end of term||–||1.40%||–||–||–||1.50%|
|Judo Bank||Personal Term Deposit | Paid annually||–||1.40%||–||–||–||1.45%|
|Arab Bank Australia Limited||Term Deposit | Paid end of term||–||1.35%||–||–||–||–|
|ME Bank||Term Deposit | Paid end of term||1.25%||1.30%||1.30%||1.30%||–||–|
|MOVE Bank||Fixed Term Deposit | Paid end of term||1.10%||1.30%||–||–||–||–|
|QBANK||Term Deposit | Paid end of term||–||1.30%||–||–||–||–|
|HSBC||Term Deposit | Paid annually||–||1.30%||–||0.50%||0.55%||0.55%|
|ME Bank||Term Deposit | Paid annually||–||1.30%||1.30%||1.30%||1.30%||1.30%|
|Teachers Mutual Bank||Term Deposit | Paid annually||–||1.30%||1.25%||1.25%||1.25%||1.30%|
|UniBank||Term Deposit | Paid annually||–||1.30%||1.25%||1.25%||1.25%||1.30%|
|Australian Military Bank||Income Plus | Paid monthly||–||1.30%||–||–||–||–|
|Judo Bank||Personal Term Deposit | Paid monthly||–||1.30%||–||–||–||1.40%|
|Teachers Mutual Bank||Term Deposit | Paid monthly||–||1.30%||1.25%||1.25%||1.25%||1.30%|
|UniBank||Term Deposit | Paid monthly||–||1.30%||1.25%||1.25%||1.25%||1.30%|
Source: Canstar, as at 23/7/20
Interest earned on an initial amount of money invested as well as on the accumulated interest. Interest can be compounded at different frequencies such as monthly, semi-annually, annually and so on. The compound frequency, the number of compounding periods and the interest rate will determine the amount of interest earned on a term deposit investment.
Of course, term deposits can come with a variety of terms (durations), typically ranging from one month to up to five years. The rate of interest available may vary depending on your chosen term.
What else makes for a good term deposit?
While important, a high interest rate isn’t the only factor to consider when looking for a term deposit. In researching our Term Deposit Award, Canstar evaluated term deposits based on price as well as features such as:
- How easy it is to open an account
- How and when interest is paid
- The flexibility to make adjustments to the term deposit where early withdrawal is available
- The availability of automatic rollovers and any bonuses that could apply
You can compare term deposits based on your own financial requirements from a wide range of different institutions using Canstar’s comparison page. You may also want to make sure to read the product disclosure statement (PDS) for your chosen term deposit before making a decision.
If you enjoyed reading this article then you may be interested in our free 8-week Money Makeover. The goal is simple, to help you become the best financial version of yourself!