High Interest Rate Term Deposit

High interest rate term deposits are coveted by investors and are the financial holy grail, not only because high interest rate on a term deposit will earn you high returns, but also because a high interest rate on a term deposit is guaranteed so when you find it, don’t let it get away, just make sure you really have found ‚ÄòThe One’, not just ‚ÄòThe One With The Best Promotions’.

How to Find High Interest Term Deposits

To find the best high interest term deposit you first need to know what you’re looking for because the term deposit with the highest interest rate in Australia may not be the best one for you because it is offering that rate on $25,000 deposits when you have only $10,000 to invest for example. So as well as knowing what you’re looking for you also need to know:

What’s in the fine print? You need to be sure that the high rates you are looking at are going to be high for your needs, not just for the promotional example in the fine print at the end of an asterisk. This is why it is important to know what your term deposit needs are before you start comparing high interest rate term deposits because if you don’t know what you’re looking for, it can be hard to compare all the term deposit products on a level playing field.
Where to look for high interest term deposits. This comes down to the term deposit provider because now is no time for loyalty to the bank which happens to hold your home loan, or disregarding the provider you’ve never heard of. Yes, look at the offers from the major banks, but don’t disregard the secondary and smaller banks and financial institutions in Australia either. Smaller term deposit providers can often be offering very attractive interest rates on their term deposit products with the purpose of attracting you away from those bigger banks. Not all the high interest term deposit specials will be right for you, but make sure you take the time to find out what’s on offer because once you find that high rate on the term and amount you need, you can lock it away.
What’s going on out there? When you are looking for a high interest term deposit for your needs, you need to get out there and find out what’s going on. This means asking your friends and family for advice, reading finance articles and blogs and getting an understanding of the term deposit industry, if only a basic one. Knowing what people are saying and what the market is thinking can help you in spotting those deals which are too good to be true, and finding that niche term deposit provider who has just the features for you.

What is a High term Deposit Rate for You?

As well as knowing what you are looking for, you also need to have a base line to work from, so you know what you are comparing the rates on offer to, and whether you’re looking a truly good rate or whether that is actually a low industry standard. A high interest rate might be:

The average interest rate you can expect from a high interest savings account is approximately 5.00%. The interest rate on a savings account however, is variable and so while it will probably be going up in the near future, over the long term it is just as likely to dip back down again. With a term deposit account, your interest rate is locked in for however long you choose.
A long-term term deposit rate may not be as high as a savings account. If you are investing in a term deposit for the long term, for your retirement, your child’s education, that European holiday, you need to be sure your interest rate can go the distance and while a long distance term deposit rate may not seem as high, it is fixed and will remain where it is long into the future, while the interest rate of a high interest savings account is not fixed and is likely to go down again before you retire, or jet off.
A short-term term deposit rate should be higher than a savings account. If you are investing your funds in a term deposit for just a month or two while you wait to make an important purchase or decide what to invest in next, you want an interest rate which is comparable to that of a high interest savings account. High interest savings accounts often offer promotional periods for just a few months where rates can be as high as six or seven per cent, plus those promotional rates are generally guaranteed for the introductory period. Therefore, if you are looking at a term deposit account to remove temptation and keep your savings out of sight, make sure they’re still working behind your back.

You are considering a term deposit investment to grow your savings and so a high interest rate seems like a non-negotiable feature right? After all the interest rate is what will grow your funds, and the higher the better. However, there are a number of factors which influence the interest rate your term deposit can earn, and several things you need to keep in mind when choosing an investment term and interest rate to make sure you are choosing a high interest term deposit which will go the distance.

Importance of Choosing a High Interest Term Deposit

While money is not and should not be the most important thing in your life, in order to make sure that that is true for you, you need to be in control of the money you do have, no matter how much that may be. Obtaining money does not have to rule your life, but when you are in control of your finances and have your savings safe and growing, you can focus on the things in your life which really are important.

How a high interest term deposit can influence your finances:

You are growing your savings easily. You have worked hard to be able to put some of your wages away into a savings account and now you have decided to invest them, you want to make sure they keep working hard for you. However, if you don’t have the time or the inclination to follow the share market or the value of the dollar then you need an investment which will grow without you and a high interest term deposit is that investment. Once you choose your investment amount and term your interest rate is locked in and so are your funds. After that your investment earns interest daily and compounds that interest throughout the term of your investment until maturity when your interest is paid out. The only decision you have to make is what to do with your funds at the end of the term.
You need a high interest term deposit to keep up with inflation. Inflation basically means that the cost of everything increases over time; something which you can buy for $10 now, may cost you $12 in a year’s time. Inflation is one reason you need your term deposit to be earning a high interest rate because you are investing your funds, to be withdrawn in the future, when the costs for everything will be greater. Whether you are saving for something specific or just saving as an investment in your future, you want to know that your term deposit will still be valuable when it matures. Inflation increases at a rate of between two and three per cent every 12 months; but you don’t just want your term deposit to keep up with inflation, you want your investment to be genuinely increasing and so you need to be earning more than three per cent interest in a high interest term deposit each year.
Term deposit interest rates reflect the official interest rate. The official cash rate in Australia may be rising but it is still not at the peak of its cycle. In fact, the cash rate is still only just recovering from the emergency post-GFC levels and so it has a way to go before it reaches those pre-GFC heights again. As a result, term deposit interest rates are not currently as high as they might be when rates rise again. To make sure you get the highest rate term deposit account which will earn you what is considered a high rate now and in the future.

How to Choose a High Interest Term Deposit

There is such a range of term deposit accounts and options that each of the choices you make about your investment affects the interest rate you are able to earn. To earn the highest interest rate on your term deposit:

Shop around and compare term deposit rates on your choices. When choosing a term deposit account you will need to compare the rates offered on your specific term deposit needs. This is because not all banks offer the same rates on the same terms, plus at any one time a term deposit provider may be offering a special high rate on the same term and investment amount you are looking for. So where a term deposit provider may offer the best rate in Australia on a three year term deposit with a $10,000 investment, it doesn’t necessarily mean they will be able to offer you the best rate in Australia if you want to invest just $5,000 for 12 months.
Longer terms can earn higher interest rates. Term deposit providers will generally offer the highest interest rates on their longest terms to encourage you to deposit your money for as long as possible with them. It is also important to remember that a term deposit interest rate for a term of less than 12 months is still a per annum rate; if you are looking at a six month term deposit with an interest rate of 4.00% for example, you will only be earning 2.00% interest on your investment because you are not investing for a full year, so are not earning a full year’s rate.
Choose a term you know you can stick to. While you can earn a higher term deposit interest rate for a longer term, if you have to access your funds before the end of the term you will no longer earn that high interest rate. When you access the funds in a term deposit early, most term deposit providers will deduct a percentage of your interest rate from your returns when you cancel your investment, so to make sure you earn a high term deposit interest rate for the entire term, choose a term you know you can maintain.

A term deposit is not an investment you see growing by the day because while your interest is calculated daily, you are going to see returns at a minimum of monthly, and maybe not until the end of your term if that is what you have chosen. Therefore, you need to know from the beginning you have a high term deposit interest rate being earned so you can remain motivated in investing for your future.

You May Need a High Term Deposit Interest Rate

A high term deposit interest rate can benefit every type of investment need, and a fixed term deposit can guarantee that you will earn that high interest rate for the entire term. So no matter what your savings goals are, you should consider a high interest term deposit account; for example:

You don’t want to spend your holiday fund before your holiday. If you are planning a big trip then you know exactly when you need access to your funds and can choose a term deposit accordingly. You may have been given money to pay for your honeymoon as an early wedding present, or you may have simply reached your holiday savings goal before you expected to, either way you want to make sure your spending money is there when you see a gorgeous souvenir, not when you see a gorgeous pair of shoes on your lunch break. By investing in a high term deposit you can keep your savings safe from temptation while growing them even more for you holiday fund.
You are investing in your child’s education. You may have started an education fund when your child was born and as the cost of tertiary education increases you want your savings to do the same. Therefore, you may choose to invest in a high term deposit for several years until your child finishes school and decides on their studies. A medium-term term deposit will have a high rate of interest to keep up with the increasing costs of education, so you can start on a savings fund for your next child.
You want to secure your retirement savings. As a long term savings goal you need a high interest rate on your retirement term deposit to keep up with the costs of inflation, as well as to make sure that you are getting what will still be a high rate of interest several years into your term. Official interest rates are likely to keep rising and if you are locking away your retirement fund for five years, you want to be getting a rate which will be in line with official rates in five years’ time too.

How to Get the Highest Term Deposit Interest Rate

The high term deposit rates you see advertised are often only offered on the provider’s five year terms and are calculated on high balances. However, even if you are investing just some of your savings for a short term, you can still find a high interest rate:

Take advantage of specials. Term deposit providers have sales and offer specials on their products to attract customers just like any other business so if there is a special on a term you are comfortable, offered on the amount you have to invest, lock it in!
Invest as much as you can in the short term. If you are investing for just a few months in a term deposit, you will be offered lower interest rates. However, if you invest a significan’t amount in your term deposit, you can become eligible for higher rates.
Have interest paid at maturity in the medium term. Investing for several years, it can be tempting to have your interest returns paid out as regular income. However, if you choose to have your interest paid at maturity, you will earn a higher rate of interest on your investment throughout the term.
Keep your funds invested for long term high interest rates. Investing a significan’t balance and having your returns paid at maturity on a long term investment will get you a high term deposit interest rate. Long term high value term deposits are very attractive to term deposit providers and they are willing to reward you with high interest , if you’re just willing to wait for it.