Minimum term deposit requirements vary widely across financial institutions. That’s why it’s important to compare different providers to make sure you’re getting the highest interest rate possible for your savings. Take a look at the varying minimum deposits required with Savvy, and read on to find out where to get the best deal on your savings. Compare with us today to be sure you’re growing your funds as fast as possible.
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There’s a wide range of term deposits available in Australia, ranging in size from $500 upwards, and in length from one month to five years. The minimum dollar amount you’ll need to open a term deposit varies from bank to bank, and differs according to the length of time you wish to lock your funds up for, so it’s important to compare them before you decide on which is best for you. The differences between providers of term deposits include:
Minimums for personal term deposits
The very smallest amount you’ll need to open a term deposit is $500, although such low minimum deposits are rare. It’s more common to find retail term deposits with a $1,000 or even $5,000 minimum requirement. The higher the interest rate on offer, the higher the minimum deposit amount tends to be.
Minimums for business term deposits
Once you start to compare business or self-managed super fund (SMSF) term deposits, the minimum deposit requirements are far higher. Most business term deposits require a minimum of $5,000 deposit, ranging upwards to $25,000 or even more in the case of long-term high-interest investments. Deposits for self-managed super funds, trusts and corporations follow the same trends and frequently offer the same interest rates as business term deposits.
To gain maximum interest on your minimum deposit, it’s important to compare as many options as you can with Savvy. You’ll be able to choose the best term deposit for your needs with more confidence by comparing top rates and offers from different institutions. Some other tips for increasing your total interest are:
Look at smaller, online financial institutions
Look to the smaller online banks, building societies and credit unions to find the highest interest rates on term deposits in Australia. For example, while a major bank may offer a 0.10% p.a. interest rate for a six-month deposit, a smaller institution could offer 1.95% p.a. for the exact same term (interest paid at maturity). The resulting interest would be:
That’s why it’s important to compare as many financial institutions as possible before committing to your choice, as the best rates could be hiding in plain sight.
Consider a longer term
The longer you lock away your savings, the more time it’ll have to generate interest. Most financial institutions offer a range of short term deposits under 12 months in length and a range of long term deposits between one and five years. The longer the term you choose, the higher the interest rate on offer. It may not always be worthwhile choosing the minimum term deposit length.
Get your interest paid monthly and compound
Some institutions offer a slightly higher interest rate (often 0.05% p.a.) if you agree to have your interest paid less often. This may sound like a good deal if you don’t need the interest immediately, but don’t forget that you’ll lose the compounding effect if you only receive your interest annually. However, if rates are the same, more frequent compounding is the better option. Look at the following example relating to a $25,000 deposit invested for three years at a 3.60% p.a. interest rate:
This example shows how having your interest paid monthly increases the interest earned as a result of compounding. You can use Savvy’s term deposit calculator to compare interest rates and work out exactly which the best deal is overall for your funds.
Remember that compounding only works if the bank or financial institution permits interest to be paid monthly and allows it to be paid back into your term deposit account to allow compounding to take effect. Some institutions require your interest to be paid into another linked bank account, which means you won’t benefit from compounding your interest.
Shop around for special offers
Banks and financial institutions also advertise special offers occasionally to attract new customers and deposits. Such specials can offer great value to the wise investor, so it’s worth checking back with Savvy often to take advantage of these specials.
For example, a bank may offer a special interest rate of 2.85% for a six-month term with a minimum term deposit of $5,000, which may be much higher than competitors’ rates. Even on a $5,000 deposit over six months, you can see a marked difference:
Some of the main advantages of small term deposits include:
However, the disadvantages of smaller term deposits could be summarized as: