Everything you should know about term deposits

Get you head around a different type of savings account


1. What is a term deposit?

A term deposit is a type of savings account with a fixed interest rate for a set period of time. Different to a normal savings account, term deposits restrict access to your savings for the agreed term. If you end up choosing a term deposit with us, that term could be anywhere from 3 to 36 months depending on your needs.

2. Triple check your finances for an airtight offer

Term deposits give you certainty about the interest rate you’ll earn on your savings. This can make it easy to save and budget, as you know exactly how much interest you’ll get each month regardless of fluctuations in the market. If the market goes down, your interest rate stays the same. Another benefit (though for some this is also a drawback), is that a term deposit doesn’t allow easy access to your savings. They’re a great option for some savers because limited access means it’s harder to dip into savings when those inevitable temptations arise – we’re looking at you, online shopping.

Term deposits are also low stress and maintenance. There are usually zero or low account fees, and no requirements for you to do anything other than leave the funds untouched. Plus, the term deposits we offer are Government Guaranteed up to $250,000, making them one of the safest places to put your hard earned cash.

3. What are some of the drawbacks?

While the limited access of a term deposit can benefit some people, for others this can be a pretty big drawback. If you need to use some of your savings during the term, you may need to pay a withdrawal fee or lose the interest you might have otherwise accrued. It’s important to check the product terms and conditions before you take on a term deposit to be clear on what withdrawal penalties might be.

Most term deposits also don’t allow you to make additional contributions after your initial deposit. This might be a hassle for regular savers, who want to keep putting their money away more regularly. One way to get around this is to have multiple term deposits with staggered maturity dates. You could also have an online high interest savings account to park your additional savings while your term deposit matures. On that note, term deposits often offer lower interest rates compared with other online savings accounts. This is the tradeoff for locking in a guaranteed rate for a set period of time.

That said, there can be a few hurdles involved in securing a high interest savings account – such as requirements to deposit a certain amount per month. So sticking with a lower, reliable interest rate can be a better option for some.

4. What kind of saver is best suited to term deposits?

A term deposit might work well for you if you’re someone who:

  • Has a tendency towards unnecessary spending or not sticking to your savings plan
  • Prefers predictable and guaranteed interest payments that won’t fluctuate with the market
  • Likes a set-and-forget, low maintenance approach to saving.

Sound like you? Check out our term deposit accounts right here.

5. How long should I lock away my money?

Everyone is different, so the amount of time for a term deposit changes for each of us. Your ideal term will depend on a few factors such as your savings goals and the access you require without penalties. Here at Hume we offer term deposits for 3, 6, 9, 12, 24 and even 36 months. But remember, the interest rate you’ll earn on your savings depends on how long you choose to keep your money in the account.

The longer you’re willing to leave your savings with us, the higher the interest rate you’ll earn on your matured amount. You can also roll over your term deposit if that works for you.

6. Should I get my interest paid monthly or at maturity?

Term deposits often have a couple of options when it comes to paying the interest you’ve accrued – monthly, annually or at the end of the agreed term (at maturity). Some banks, such as Hume Bank, will offer you a choice on the frequency of payments, others only offer one option. So what’s better? Ultimately, there is only a very small difference between the two options in terms of the total amount of interest you earn.

If you’d like access to the interest you’re earning as you go, monthly repayments might be for you. If you want to squeeze every drop of savings juice our of your term deposit, interest paid at maturity will earn you marginally more.

7. Are there any costs involved in getting a term deposit?

While some institutions may charge a small fee, our term deposits are free of set up and account keeping fees. However, if you wish to withdraw some or all of your money before the end of the agreed period, some fees may apply and there may be an adjustment on the interest your savings have earned.

8. How much do I need to get a term deposit?

To get started with a term deposit you need to deposit a minimum of $1,000 for interest paid annually or at maturity, and $5,000 minimum for interest paid every 28 days.

Get all the information on our term deposits here. You can also call us on 1300 004 863 or pop into a branch.