Flexibility grows on term deposits

While mortgage borrowers enjoy low interest rates, for people on fixed incomes low rates for deposit accounts are nothing to cheer about. It pays to look around for the highest rate coupled with the best conditions. But if you don't want to tie up your money and are prepared to sacrifice the lowest rate for flexibility, consider two term deposit options from the National Australia Bank and the ANZ.

The NAB offers two products: “Trade Up” and “At Call” term deposits. Trade Ups are available for two years only and allow you to trade up if interest rates rise during that time. A minimum deposit of $5,000 is required and the rate is 3.5 per cent. At Call deposits allow you to withdraw part of your money during the term without penalty; the rates vary depending on the amount deposited and the term: for example, on $20,000 to $100,000 it is 3.9 per cent.

ANZ also offers flexibility with its Callable term deposits. 40 per cent of the original deposit is withdrawable at any time, regardless of the term, without a reduction in interest rate or the payment of fees. Interest rates vary depending on the term and the amount invested; for example $20,000 invested for two years would earn 3.45 per cent while $100,000 would earn 4.1 per cent. As a comparison, conventional ANZ term deposits would offer 3.7 per cent on $20,000 for two years and 4.54 per cent on $100,000.

There's another option for retirees on fixed incomes: accounts such as ING Direct Savings Maximiser, AMP Banking easysaver and St George Bank's dragondirect offer rates from 4.25 per cent to 4.55 per cent. So why would anyone lock up their money for longer terms? Cannex's Andrew Willink says that people want to invest in term deposits to “achieve certainty in income”. The high-yield rate of at-call deposits may go up or down but term deposits have a degree of certainty.

To find a term deposit facility to suit your needs click here.

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