Banking terms can sometimes be confusing, and with many things to be aware of, opening an account or getting an investment product doesn’t look too easy. In some instances, you may have encountered the phrase “term deposit”. In this article, let’s get to know more about it and learn things to take into account should you decide to get one.
The “term” in term deposit refers to that period when your money will be saved and put away.
A term deposit is a long-term investment product that enables you to put away money with an agreed fixed rate for a fixed amount of time. It’s a popular cash investment for security and higher returns. The “term” in term deposit refers to that period when your money will be saved and put away. It is a pre-determined period, which means that in the process of getting a term deposit, you will decide and agree on how long your money will be deposited and when you can access it.
Here are other things that you need to know about term deposits in Australia:
The term comes in two types
You can choose either a short-term or long-term deposit. Short-term deposits range from one month up to less than a year. You can choose to lock your savings away for 30 days, 60 days, 90 days, 120 days or 180 days etc. On the other hand, long-term deposits can be from one year up to five years, or even seven years. If you are able to get a competitive interest rate and can manage without your savings for a long period of time, then this term may be good for you. It depends on your personal circumstances and goals.
Look for competitive interest rates for term deposits
A term deposit comes with a fixed interest rate. This means that once you lock in a rate for the entire term, your earnings will be based on that interest. It will not be affected by market fluctuations. That is why it is important to get a competitive interest to earn high and steady returns.
Watch out for the penalty fee
You usually don’t have to pay setup and/or ongoing fees when you get a term deposit. However, expect to pay a penalty in the event that you want to access your money before the end of the term. Penalty fees vary depending on the bank or financial institution. Make sure to ask about the penalty charge should you need to break the term deposit agreement.
Term deposits are a great way to save money and make it work for you. Like in other investment products, it pays to know your financial goals so you can better choose the right term deposit for you.
Do you have other tips on term deposits and interest rates? You can share your ideas in the comments section below.