Lockable savings accounts come in two forms: bonus saver accounts and term deposits. Both make it harder for you to withdraw money to help you save, but they have noticeable differences. That’s why it’s important to compare them with Savvy to find the one that’s right for you.
Interest rates
A bonus saver account comes with a variable interest rate while a term deposit comes with a fixed rate. The rates on bonus saver accounts are generally more competitive than a term deposit. However, a fixed rate protects your savings goals if there’s a downturn and interest rates hit a slump, guaranteeing you a set return on investment.
Minimum balances
To earn a high interest rate, bonus saver accounts will often come with a bunch of requirements, such as holding a minimum balance each month. This isn’t a factor with term deposits, as your interest rate is locked in.
Accessing your money
While a bonus saver lets you dip into your savings whenever you see fit, you probably won’t qualify for the higher interest rate if you do. Withdrawing from a term deposit is harder, as institutions will typically only let you withdraw if you give them 31 days’ notice and you’ll likely forfeit the interest you’ve earned for the month.
Deposits
Depending on the institution you’re with, term deposits usually have minimum down payments of between $1,000 and $5,000. You’ll also have to wait until your term is completed to top it up. Making deposits is easier with a conditional saver account, as you’ll be able to make ongoing payments without restriction.
Linking account
A conditional saver account allows you to set up a linked everyday account. You can transfer a sum of money from your saver to an everyday account to pay your ongoing expenses. If you open a term deposit, some institutions will offer to pay the interest you’ve earned into a linking account, but you otherwise won’t be able to access the funds during your term.
Term length
The length of time you can lock your money away is also different between the two accounts. Your term on a bonus saver is open-ended, whereas a term deposit has a set period, which can be anywhere from one month to five years.
