November 24, 2017

How Does a Term Deposit actually Work?

Aside from your savings account, there are several investment products that you can consider where you can keep your money and let it work for you. One of these is the term deposit.  It is a form of cash investment where you agree on an interest rate for a term or a fixed period. It is being offered by banks, buildings societies, and credit unions.

A term deposit is a great cash investment that offers a stable return of your hard-earned money. How? These are some of the things that you can expect when you open a term deposit:

  • Fixed interest rate. There is an interest rate that you will agree on when you open a term deposit. This is fixed, meaning it will apply over the duration of the term, regardless of market fluctuations. This ensures that you’ll have a stable return. However, you will not benefit in case the market interest rate increases, that’s why it is essential to do some fixed term deposit comparison and choose which offers competitive rates.
  • Term. It is up to you on how long your money should be locked away. It can be a short term deposit wherein your money will be invested from one month to less than a year. It can also be a long term deposit wherein your money will be locked away from one year for up to five years. Of course, the longer you allow your money to be on this cash investment, the higher the interest rate will be.
  • Fees. Opening a term deposit does not require any startup or ongoing fees. Bear in mind, though, that you will have to pay a penalty should you decide to withdraw your money sooner. The interest rate will also be reduced.

To avoid penalties, consider your financial goals to see if term deposit is suitable for you. For instance, if you’re planning to buy a house in a few years and you want your money to yield better returns then opening a term deposit may be a great way to grow your money.

Another consideration is the market. It is important to check the interest rates for term deposits of banks, building societies, and credit unions. Remember that you will be stuck to your chosen interest rate over a certain period, so make sure to check the rates first.

Do you have other ideas on term deposit rates in Australia and fixed term deposit comparison? Share your insights in the comments section.

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Finding the Term Deposit that Suits You

When it comes to saving, it is often said that you should never put all of your eggs in one basket. This only means that you should not put all of your savings in one account or investment product. This is to minimise risk of losses and ensure that your money will give you much better returns. There are so many “baskets” or savings and investment products to choose from, and one of them is term deposit.

Term deposit is a form of investment that comes with a fixed interest for a specific period of time, or term. A lot of people opt for a term deposit since it offers flexibility on the range of terms, the fixed interest rate will not be affected by market fluctuations, and it helps you to be more disciplined when it comes to saving. Your money is locked away for a certain period, so you cannot easily access your money in the term deposit.

Here are some things to take into account to find the term deposit that suits you:

Interest rates

The interest rates for term deposits are a main consideration when looking for a term deposit that suits your needs and financial situation. There are a lot of banks that offer term deposits so make sure to find a fixed interest rate that offers guaranteed and better returns. It helps to do a term deposit comparison so you will be able to check their features and make a more informed choice.

Term

Another thing to consider is the term or the specified period for the term deposit. Short term deposits can be 30 days up to less than a year, while long term deposits can be one year up to five years. Upon checking the offerings of various banks, you’ll find out that the longer the term is, the higher the interest rate tends to be.

Payment frequency

It is also important to determine how often the interest is paid on your money. It can be monthly, quarterly, annually or even at maturity.

Fees

Getting a term deposit doesn’t come with a setup fee or ongoing fees. However, take note that there may be a charge should you withdraw your funds sooner. Of course, there will also be a reduction on your returns.

Got other ideas on term deposit comparison and interest rates for term deposits in Australia? Share your insights in the comments section.

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The Pros and Cons of Using a Term Deposit

A term deposit is one of the many investment products that can help grow your savings. For a lot of people, term deposits can be daunting, and with numerous information resources and factors to consider, finding the right one can be a confusing process.

To determine if a term deposit is suitable for your needs, it is best to do a term deposit comparison. Check interest rates for term deposits from several financial institutions. Another way to compare term deposits is to look at their advantages and disadvantages. In this way, you’ll be able to zero in on the term deposit that fits your requirements.

Here are some of the pros and cons of using a term deposit:

Pros

Some investors consider it low-risk form of investment

If it is under an Authorised Deposit-taking Institution (ADI) and is no more than $250,000, your deposit is guaranteed by the Australian Government.

It’s not affected by market fluctuations

Interest rates for term deposits in Australia are fixed, meaning your deposit will earn with the same interest rate even if interest rates in the market fluctuate. This also enables you to earn more than if you save your money in a transaction account.

It helps to avoid bad spending habits

With a term deposit, you cannot withdraw your money during the term, which can be months or years. This will stop you from accessing your money to buy things that you don’t really need.

Cons

You cannot use your money 

Locking your money away for a certain period of time can also be a disadvantage, especially if you really need it. Bear in mind that if you withdraw your money before the term ends, you will pay a penalty. That is why it is important to understand your financial situation first before using a term deposit so you will know if you’re capable of keeping your hands off your money until it reaches the maturity date.

It will not benefit from the increase in market interest rates

Since a term deposit comes with a fixed interest rate, it will not earn from rises in the market. To avoid this, make sure to get competitive interest rates for term deposits before committing to a particular term.

You cannot make extra deposits

It is not flexible enough to take additional deposits during the term. To address this, use several term deposits with varying terms.

Do you know other benefits and drawbacks of term deposits in Australia? Share your insights in the comments section.

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What Does the ‘Term’ Mean in Term Deposits?

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.

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.

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Use a Term Deposit Throughout the Year to Buy Your Kids’ Christmas Presents

Yes it’s a while until the silly season starts again. But…..

The cost of buying your kids presents can get expensive come December. So how do you plan ahead and save money now so Christmas next year isn’t a big blow out and a big hit on your credit cards?

Why not consider a term deposit? Use savings you have now and in effect lock your money away and earn interest on it in the process.

A term deposit is where money is deposited with a fixed interest rate over a certain period or term. Having a term deposit comes with many benefits. Aside from earning more than a standard transaction account, the interest rate will not change throughout the term so your money will not be affected by any fluctuations in the market.

Financial institutions like banks, building societies, and credit unions offer different term deposits, and it is best to shop around and do term deposit comparison first to find one with features that meet your needs and financial situation. Here are some of the features of term deposits in Australia that you need to look for:

Choose the right term

This can be short-term which ranges from one month to less than a year. You can have a term deposit for 90 days, 120 days or 180 days if you don’t want your savings to be locked away for a long time. On the other hand, a long-term can be one year up to five years. If you’ve found competitive interest rates for term deposits and you don’t need your money anytime soon, then this may be the term for you.

Know the fees involved

Term deposits do not have setup fees, but it pays to ask so there are no surprise charges later on. You may, however, face a penalty fee if you wish to break your agreement sooner. It differs depending on the financial institution but it can be a huge amount so the term should be carefully considered.

Understand when and how interest is earned

The payment frequency plays a role on when the interest is calculated. For instance, for annual payments, interest is paid at the end of every year, while monthly payment comes with interest that is paid at the end of every month.

The interest can likewise be compounded or not. Compounded interest refers to when the interest is added to the term deposit on a regular basis, depending on payment frequency. Also, there are financial institutions that let you transfer the balance of your term deposit to your transaction account even if it’s under a different bank.

Got other tips on term deposit rates in Australia? You can share your ideas in the comments section below.

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How to Use a Term Deposit Account to Save for Your Next Holiday

A term deposit is an easy way to save money and capitalise on more competitive interest rates. If you are not the best when it comes to saving, a term deposit is a good option because your funds are locked in until the term ends or it reaches maturity.

If you want to save for something big, such as a holiday, here is how you can get the most out of your term deposit and maximise your profit.

The Benefits of a Term Deposit

  • The risk of losing money is minimal
  • Interest is generally going to be higher than if you saved your money in a regular savings account
  • Once you have selected an interest rate, it will stay the same throughout the life of the term

High Interest Rate

It is currently a good time to take advantage of investing in a term deposit because interest rates in Australia are competitive. However, some bank rates will be higher than others. Prior to opening an account, be sure to do your research and find out the highest rates available.

Save over a longer term

The general rule is, the longer the term, the higher the rate of interest. If you are planning a big holiday a few years in advance, now might be a good time to put your funds in a term deposit. For example, based on the current rates, on a one year term you will receive 2.9 percent, and on a five year term the interest rate is 3.4 percent.

Roll Over Rates

If you already have funds locked into a term deposit, think about not letting your money roll over automatically. Make sure you make a note of the date of maturity and search for a bank with a higher rate and transfer your funds to another term deposit. This is a little trick to get the most out of competitive term deposit interest rates in Australia.

Compound Interest

Compound interest means that you earn interest on top of interest and it is displayed as an annual percentage rate. Since your money is locked in, interest rates are automatically compounded.

For example, if you have made a deposit of $10,000 and the interest rate is set at 8 percent per annum, you will make a profit of $800 after 12 months. Interest is either paid out monthly, quarterly or annually; therefore, if your interest compounds often, the more money you will make.

Final Thought

If you want to put away money for a holiday and at the same time allow your money to work for you, a term deposit might be a good option for you. However, it might be a good idea to make sure you have a full understanding of the process by getting financial advice from an expert.

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How Opening a Term Deposit might Help Pay for Wedding Costs Later

“Do not put all of your eggs in one basket.” It’s an old saying that holds true for savings. If you’re serious about growing your money, it is not enough to keep it in a typical savings account. Let your money work for you by putting some of it in other products that can offer better returns. One of these is term deposit. It is a cash deposit at a bank, building society or credit union with interest in a certain period of time, referred to as term.

Opening a term deposit is a good idea, especially if you are saving for a major event or milestone such as a wedding. Time is your asset when it comes to term deposits so start saving early so you can grow your money. Before you know it, you’ll have money to pay for wedding costs. Here are some things to consider when it comes to term deposits:

Know the term deposit rates in Australia

The best rates are usually for longer-term deposits. Banks and other financial institutions offer different rates, so make sure to compare their offerings to get the best option. You can use fixed term deposit comparison websites to make the selection process easier.

Think about tenure

The longer you keep your term deposit, the higher the return is. The length of your investment can range from one month to five years. Assess your financial situation so you can decide which tenure suits you.

If possible, open more than one term deposit

Interest rates for term deposits change, so many investors usually divide their cash to invest in deposits at different terms. In this way, they can get the most out of the best fixed interest rates available. They also get higher returns for longer-term deposits while having access to cash on shorter-term deposits.

Prepayment penalties apply

Term deposits are ideal for money that you don’t need right now. That is why if you’re setting money aside for your wedding in the future, opening a term deposit is a good idea. However, in case you need to get your money before the maturity date, you will pay early withdrawal or prepayment penalties.

Look at the credit standing

While Australia has a Financial Claims Scheme wherein bank deposits of up to $250,000 per customer and institution are guaranteed, it is still important to check the credit rating of the institution where you want to open a term deposit.

Got other tips on interest rates for term deposits in Australia? You can share your ideas in the comments section below.

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Helpful Tips for Term Deposits in Australia

Opening a savings account is one of the common ways to save money in Australia. It gives you full control of when you want to deposit, how much money you want to save, and when to get it. But there are other savings products that can give slightly better returns. One of these products is a term deposit.

A term deposit refers to a deposit account wherein you set money aside for a certain period of time, or term. This comes with a fixed interest rate for your return at the end of that period. Here are some helpful tips about term deposits and term deposit rates in Australia:

Know the advantages and disadvantages of a term deposit

Money is locked away in a term deposit, so you will be able to save and grow your money for a certain period. A term deposit is also considered as one of the savings products with the lowest risk. The government likewise guarantees term deposits reaching $250,000 with a bank or an authorised deposit-taking institution.

On the other hand, since your money is locked away, you cannot readily withdraw it when the need arises. There may also be penalties if you wish to withdraw early. Another disadvantage is the missed opportunity of getting a higher interest rate, since your term deposit comes with a fixed rate.

Choose the term that suits you

Terms can be as short as one month or as long as five years. Depending on your needs and preferences, the interest payment can be done monthly, quarterly, yearly or at the maturity date.   

Compare term deposit rates in Australia

Since your money will be locked away for a fixed interest rate, consider checking your options first and choose the one that gives a competitive rate. Bear in mind that it is affected by your initial deposit and the number of months or years you plan to invest.

Final Thoughts on Term Deposits

A term deposit is generally a good product that lets you save money with good returns. Keep in mind, though, that there are other products that enable you to grow your money. “Don’t put all of your eggs in one basket.” Experts in financial literacy would always say this old adage. It just means not putting all of your savings in one account or investment product. This is to protect you from any unfortunate event and to fully maximise the potential of your money to work for you. Think about your financial goals and have a better understanding of investment products that you wish to have.

Likewise, it’s a good idea to talk to a financial adviser about your personal needs and which products suit your goals and financial strategies

Do you have other tips for term deposit rates in Australia? You can share your ideas in the comments section below.

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Helpful Tips for Term Deposits in Australia

Opening a savings account is one of the common ways to save money. It gives you full control of when you want to deposit, how much money you want to save, and when to get it. But there are other savings and investment products that can give different returns. One of these products is a term deposit.

A term deposit refers to a deposit account wherein you set money aside for a certain period of time or term. This comes with a fixed interest rate for your return at the end of that period. Here are some helpful tips about term deposits and term deposit rates in Australia:

Know the advantages and disadvantages of a term deposit

Money is locked away in a term deposit, so you will be able to save and grow your money for a certain period. A term deposit is also considered as one of the investment products with the lowest risk. The government likewise guarantees term deposits reaching $250,000 with a bank or an authorised deposit-taking institution.

On the other hand, since your money is locked away, you cannot readily withdraw it when the need arises. There may also be penalties if you wish to withdraw early. Another disadvantage is the missed opportunity of getting a higher interest rate, since your term deposit comes with a fixed rate.

Choose the term that suits you

Terms can be as short as one month or as long as five years. Depending on your needs and preferences, the interest payment can be done monthly, quarterly, yearly or at the maturity date.   

Compare term deposit rates in Australia

Since your money will be locked away for a fixed interest rate, consider checking your options first and choose the one that gives a competitive rate. Bear in mind that it is affected by your initial deposit and the number of months or years you plan to invest.

A term deposit is a generally considered a low-risk investment product that lets you save money with a fixed return. Keep in mind, though, that there are other products that enable you to grow your money. “Don’t put all of your eggs in one basket.” Experts in financial literacy would always say this old adage. It just means not putting all of your savings in one account or investment product. Consider visiting a financial adviser who will look at your situation as a whole and work with you to determine your goals and risk profile. They will be able to then recommend investment products that suit you.

Do you have other tips for term deposit rates in Australia? You can share your ideas in the comments section below.

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