Term deposits are an investment of cash placed within a financial institution for a fixed period of time usually ranging from a one-month to five-year period, earning fixed interest usually over that time. They tend to suit investors and savers who prefer a lower-risk option that near-guarantees a set return, as opposed to investing in riskier but potentially more lucrative assets such as shares and property. Currently, interest rates on term deposits are relatively low because of today’s interest rate environment but for savers willing to shop around there may still be good value options out there.
If you’re interested in a term deposit, it’s also worth knowing you may be charged a fee, or earn a reduced rate of interest, if you decide to access your funds before your account matures. In addition, there is a chance any honeymoon rate you secured may drop after your term deposit matures, if you decide to roll over to a new term. On the flip side, some institutions may offer a bonus interest rate to reward savers who roll their investment into a new term. Consider checking with your institution what your options are when your term comes to and end.
Term deposit rates from the big four banks
The following table displays a snapshot of term deposits with a term range between 12-24 months from the big four banks – ANZ, Commonwealth Bank, NAB and Westpac – with interest paid as specified in the table below. The results shown are based on an investment of $50,000 in a personal term deposit and are sorted by the highest advertised interest 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.
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.
You can compare term deposits here to view a much more comprehensive list of term deposits with a range of terms offered not just by the Big Four, but by all institutions rated by Canstar. You can also compare these rates to the highest term deposit rates on our database in our article here.
Should you consider a term deposit from the big four?
Some people simply choose to go with a Big Four bank because of name recognition or because they already have an account with them for another product, such as a home loan, credit card or an insurance policy. But there is more to consider – you should also aim to compare term deposits based on factors such as:
- The interest rates on offer (the higher the interest rate, the greater your return will typically be from the term deposit)
- The ‘terms’ (length of the term deposit) available
- Any minimum deposit requirements that exist
- How easy it is to open and withdraw from
- Whether early withdrawals come with penalties or fees
The Big Four banks also many of the same benefits as other providers when it comes to term deposits. For example, they are recognised as authorised deposit-taking institutions (ADIs), meaning that deposits up to $250,000 are covered by the government if the ADI runs into financial trouble, but remember it’s not just the Big Four who can offer that security to depositors.
One area where the Big Four tend to offer more than their smaller competitors is branch accessibility. The big banks have a high number of branches and other customer support services available, potentially making it easier to manage and apply for term deposits and other products. However, you would need to consider whether this convenience factor is worth it overall when you factor in the interest rates available and fees charged by compared to other institutions. If you would like to compare more of your options you can view our roundup of the highest term deposit rates among all providers on Canstar’s database. Or you can view the results of Canstar’s term deposit Awards to see which providers came out on top across a range of terms when our expert researchers crunched the numbers on interest rates, fees and other factors.
No matter who you end up choosing, consider starting by comparing the options available to you. And, as always, read the product disclosure statement (PDS) before opening a term deposit so you’re aware of what you’re signing up for.
This article was originally written by William Jolly.