2. Term of deposit
Term deposits are offered from as little as one month up to a maximum of five years. Short term deposits are regarded as those which are for one year or less, so they’re measured either in days or months. Make sure the institution you pick provides the term that you’re after, as not all banks offer all lengths of time to deposit your funds.
When considering term deposit offers between institutions, always make sure you’re comparing apples with apples by using the same term investment length. For example, compare three-month term deposits only with other three-month deposits to ensure your comparison is valid. Keep checking back with Savvy so you can compare and find the best offers available to you.
3. Minimum and maximum deposits
Some providers have a minimum deposit requirement of $1,000, whilst others set their minimum at $5,000 or even $10,000. Check that the provider you choose has a minimum deposit level that you’re comfortable with.
The maximum amount you’re able to deposit also varies between financial institutions, ranging from $250,000 for some short term deposits up to $2 million or more.
4. Interest frequency
You can choose whether to have your interest paid monthly or less often, such as quarterly, annually, or at the maturity of your deposit. You can also choose whether to have your interest paid back into your term deposit account or whether to have it credited to another account. Some short term deposits of 12 months or under may only offer the option of being paid your interest at the maturity of your term.
You may be offered a higher interest rate if you choose to have your interest paid less often, but you won’t benefit from the effects of compounding. This means you won’t end up earning ‘interest on interest’ like you would if you get the interest paid back into the same account.
5. Other terms and conditions
There are no ongoing maintenance fees on term deposits. However, fees will apply if you wish to access your funds prior to your deposit’s maturity, so it’s worth checking out the following factors:
- how much notice you’ll need to give if you wish to withdraw your funds early (this ranges between 14 days and 30 days)
- what early exit penalties are charged if you wish to break your term deposit (such as a set penalty fee of between $30 and up to $50 or more will be charged)
- if there’s a loss of interest if you need to access your funds early. The loss of interest is usually a percentage, often dependent on the length of time of your original deposit and how early into this term you wish to break your contract (for example, if you break your contract halfway through your term, you may be penalised 50% of the interest you would have earned)
