Want to earn a fixed interest rate on your cash? The table below features term deposits with some of the highest interest rates on the market for a 6-month term.
The cash rate is at a record low at the time of writing (0.10% as at 2021), and as term deposit rates historically follow the cash rate, they’re also at a record low. The average term deposit rate from the big four banks across all terms is just 0.30% p.a, according to Reserve Bank data, while Savings.com.au’s analysis of a broader section of the market found an average closer to 0.43% p.a.
Six-month term deposits will almost always have lower interest rates than term deposits with longer terms because banks often want to encourage people to keep their funds deposited for longer periods. Our research finds the average 6-month term deposit interest rate to be 0.42% p.a as at May 2021. Comparatively, two, three and five-year deposits have average interest rates around 0.50% p.a.
There are some 6-month deposit rates that are much higher than this, however, if you know where to look.
The 6 month part is the ‘term’ on the deposit, and your deposit is the amount of money you stash away. Put the two together and you get a 6-month term deposit, where you lock away your money for half a year and are unable to touch it without incurring a penalty. A 6-month deposit is one of the shortest terms available, although you can get term deposits for as little as one month. Other common terms include:
With a 6-month term deposit, your total return is equal to half the annual interest rate, since you only have the term deposit for half a year. So say, for example, you have a 0.50% p.a. (per annum) interest rate on a $10,000 deposit for 6 months (paid at maturity), your total return is actually 0.25% p.a. Since term deposits are usually calculated using simple interest, that $10,000 deposit would earn you $25 at the end of a 6-month term.
A 6-month term deposit can be a great way to save money short-term. While the interest you’ll earn mightn’t be terrific, that money is still being stashed away in a safe place where you’ll be less tempted to touch it. If you want to go on an overseas holiday, for example, you could open a 6-month deposit to lock away your savings and earn a little bit of cash on the side.
On the other hand, you could open an introductory savings account which offer higher interest rates for a limited time (e.g. three months) that could be perfect for a short-term savings goal.
Longer term deposits exist, such as one- or five-year terms, and these products generally have much higher interest rates. But the main disadvantage for these products, as we’ll discuss further down, is that your money is locked away for much longer, and could leave you worse off if you ever need to access the funds or interest rates go up.