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You may be saving up for a home deposit or a big overseas trip; whatever your savings goal, term deposits offer a means to safely lock away your savings where they can earn the highest possible interest, which is why it’s important to compare to find the best.
Savvy can help you compare a range of term deposits so you can find the top interest rate available in Australia today. Consider your term deposit options with us to maximise your chances of getting the best deal.
Term deposits are a way to tuck your savings away in a place where they’ll be safe and earn the highest interest rate possible. You decide how long you want to deposit your savings for and in return you’re given a set fixed rate of interest. You can choose between a short-term deposit of as little as one month or a long-term deposit of up to five years.
During the agreed period, you aren’t able to access your money easily and if you do, you’ll lose interest and possibly be charged a penalty for early withdrawal in most cases. At the end of the term, you can decide whether to lock up your funds again for another term or roll them over into a savings or transaction account.
Almost all banks, credit unions and building societies in Australia offer term deposits, but the interest rate you’ll be offered varies dramatically between the various institutions, which is why it’s important to compare with Savvy to find the best interest rate for your savings.
Comparing different offers to find the best rate will help you increase the total interest you earn. Most lenders will have different advertised rates depending on the length of the term, typically ranging from one month to five years. In this way, it’s possible to make a direct ‘apples with apples’ comparison between lenders on specific products for a set number of months.
For example, on a $5,000 deposit with interest paid at maturity, Bank A may offer an interest rate of 0.3% p.a. for a six-month term deposit. If you deposited $5,000 with them, you’d earn $8 in interest in that period. However, Bank B may offer a 1.95% p.a. interest rate over the same term. Bank B would deliver you $49 interest for the same period.
This example illustrates how the interest rates offered will affect how much interest you’ll earn even over a short period substantially, even with a relatively small nest-egg. The larger the amount you have to deposit and the longer the period you’re prepared to lock up your savings, the more interest you’ll earn.
Because all lenders vary in their customer focus, the interest rate one lender charges for one particular product may be far more competitive than for others they offer. For example, an institution may offer a great term deposit rate for a three-month deposit, but its 12-month interest rate is lower than those of its competitors. For this reason, it’s very important to compare term deposits with Savvy to find one that offers the very best deal for the deposit period you’re looking for.
Other features that you should compare with term deposits include:
The interest on a term deposit is calculated daily based on the per annum (p.a.) interest rate quoted. There are two ways to figure out how much interest you’ll earn on your term deposit. Which method you use will depend on whether you choose to have your interest regularly paid back into your term deposit account or paid in one lump sum at the end of your deposit period. One method will involve calculating simple interest, the other will take into account compounding interest.
Interest = principal sum x interest rate x term (such as number of years)
The compound interest rate calculation is far more complex, because it involves calculating how much interest is earned each month, adding this amount onto the principal sum and recalculating the interest earned each month, based on this higher and increasing amount.
The mathematics gets quite involved – so unless you’re a maths genius, save yourself the brain drain and use Savvy’s term deposit calculator to find out exactly how much interest you’ll earn! You can also use this calculator to compare different term deposit offers so you can simply work out which one will be best for your spare funds.
Term deposits and savings accounts have plenty in common, but also have marked differences between them. Both offer a safe place to store your nest-egg whilst earning interest. However, while term deposits lock your money away, most savings accounts give you ready access to your savings, unless you choose a type of savings account known as a ‘locked’ account, which has penalties if you withdraw funds in any given month such as forfeiting bonus interest.
Term deposits offer a fixed interest rate for a set period, whereas most savings accounts come with variable rates. This means the interest your money earns in a savings account can vary depending on how your lender changes its rates based on the underlying cash rate.
Savings accounts are open-ended, which means you can deposit whatever amount you wish, grow your savings (or withdraw them) and leave your account open indefinitely. Term deposits, on the other hand, are an agreement to deposit a set sum of money for a set period and when that set period is over, you’ll have to decide what to do with your funds. Your choices include transferring them to another account or rolling them over into another term deposit.
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The greater the amount you stash away, the higher the interest rate you’re likely to receive. Many financial institutions have a tiered interest rate, with rates increasing in relation to the deposit size. You'll also boost the amount of interest you’ll earn with a larger deposit, as a $20,000 deposit will naturally earn more interest than a $15,000 deposit.
The longer you’re prepared to lock your money away for, the higher the interest rate you’ll be offered. Term deposits come with terms ranging from one month to five years, so it’s important to compare institutions to make sure they can offer what you need. Longer terms also give your deposit more time to build interest overall.
If you choose to have your interest paid at maturity, you’ll often receive a higher rate than if you choose to have your interest paid monthly or quarterly. However, it’s worth comparing to find out if you’d earn more on a deposit with a lower rate but higher interest frequency, such as monthly.
Banks and financial institutions are always looking for new customers, so they come up with tempting offers to attract new business. These special offers range from offering a free cash bonus, a higher interest rate or a waiver on fees charged on other linked accounts. They can help boost your savings, so keep a lookout for these occasional deals.
Once a financial institution has you as their customer, they won’t want to lose you, which is why many offer a bonus interest rate if you roll your funds over into a second term deposit. The additional interest offered can be as high as 0.5% p.a., so it’s well worth checking for any special rollover offers available.
Doing the research and looking for the best rate before deciding where to place your deposit will hold you in good stead, as interest differs widely and enticing deals are common. You can compare your options thoroughly with Savvy to help you find the best deposit to maximise your interest.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
