Melbourne-based mutual bank BankFirst recently boosted interest rates on its term deposits by up to 25 basis points, following the RBA's October cash rate decision.
Notably, it increased its 150-day (5 month) interest-upfront product by 25 basis points to 2.60% p.a.
This product is distinct in the market in that interest is paid first into a linked transaction account.
This is different to regular term deposits, where interest is paid at selected intervals - usually monthly, quarterly, bi-annually, annually or at maturity.
The catch is you can't withdraw the principal investment for those 150 days - penalties apply if you do. You also can't add to the balance.
On a $50,000 deposit, that results in approximately $534 in upfront interest.
However deposit interest is calculated as taxable income, so at the end of financial year you will be taxed accordingly.
The minimum deposit on this product is $500, up to a maximum of $1 million.
One million dollars would result in an approximate $10,685 interest payment.
Upfront interest payments could appeal to those concerned about annual headline 6.1% inflation eating away at purchasing power through the year.
The Reserve Bank expects it to hit at least 7.75% by year's end.
A bird in the hand is worth two in the bush.Medieval Proverb
BankFirst also increased other term deposit interest rates by between 10 and 25 basis points.
Other five-month term deposit products on the market include the following:
|Bank||Interest Rate Per Annum||Minimum Deposit|
|Credit Union SA||2.70%||$5,000|
|Bank of Sydney||2.60%||$1,000|