If you’re thinking about opening a term deposit account to help you to achieve your savings goals then it’s important that you choose and open the right one for you and your particular needs. In the first instance you need to head to a site that can compare term deposits to check out what’s on offer. You should take your time over this, as opening and funding a term deposit can be a long–term decision, with some terms being up to five years. To get you started, however, here’s a quick rundown of what term deposits are all about, as well as a very quick overview of the market offerings for September 2019 and beyond. The Big Four term deposit offerings Australia’s Big Four banks – ANZ, NAB, Westpac and CBA – all offer a range of term deposit accounts with terms lasting from 30 days to five years. Many people choose a term of six months and it’s a good indicator of the rates you’ll get as it’s a reasonable length, offering a decent return without locking way the money for too long. The ANZ term deposit offers an interest rate of one per cent for a six–month period. The minimum deposit is $5,000. If you choose a CBA term deposit for six months, you’ll get an interest rate of 1.45 per cent for a minimum deposit of $5,000. NAB has five month term deposits (150 days) paying 1.50 per cent pa at the moment. With Westpac you’ll get an interest rate of 1.30 per cent for six months and, as with the other Big Four banks, you’ll need a minimum of $5,000 to open the account. While the Big Four banks may give you that extra feeling of security that comes with a big name, a long history and branch based customer service, you may find better rates with smaller institutions. UBank’s green term deposit offers an interest rate of 1.80 per cent pa, fixed for six months, for example. It also has a lower minimum deposit of $1,000, which is ideal for younger people or if you don’t have a huge amount of spare cash AMP Bank offers an interest rate of 1.75 per cent pa for six months with a minimum deposit of $5,000. One of the best rates for a six–month term deposit comes from ME – 2.05 per cent, with a $5,000 minimum opener. Of course, this list is nowhere near exhaustive, so you still need to comb through as many options as possible before settling on your ideal term deposit. What is a term deposit? Why are they a good idea? A term deposit is a saving account that’s opened for a pre–determined amount of time (the term) and during this term, the deposit is locked in. You can’t access the funds during this time without incurring a penalty. While your money is in the account, it earns interest at the rate stipulated by the bank at the time you opened the term deposit. The interest rate is fixed, so it stays constant throughout the entire term. Once the term ends, also known as reaching maturity, you can decide to reinvest some or all of the money (the interest rate may change, though) or withdraw some or all of it. Safe and secure Term deposits are seen as a very safe, low-risk sort of investment because they offer a guaranteed return as long as you let the money mature. The interest rates on term deposits tend to be higher than those on regular savings accounts simply because you let the bank keep the money for longer. If you have some money free, maybe from a bonus or an inheritance, and you know you won’t need it in a hurry, then a term deposit could be ideal for you. You know how much you’ll be getting in the end and because you know you’ll be penalised if you make a withdrawal, you’ll probably be less tempted to take any money out. How to compare term deposit rates and features There’s no one single perfect term deposit for anyone, although some will be more suitable than others for you. You need to find an account that suits your funds and circumstances and so you need to look at these features. The interest rate should be attractive enough to give you a decent return. The duration should be of the right length for your purposes. The minimum deposit should be comfortable for you. Other things to look at The different terms available If you have a particular time limit for your savings then you’ll know how long your term should be. However, you might find that longer terms will attract a higher interest rate and so if you don’t have an end point in mind, look for a term of two, three or even five years. A term deposit calculator will help you to make up your mind. Paying tax on a term deposit You may have to pay tax on interest your term deposit earns. The amount of tax you’ll pay depends on what tax bracket you fall into and how much your overall income is. It also depends on when you get your interest paid out. The difference between a term deposit and a regular savings account The biggest difference between a term deposit and your usual sort of savings account is the fact that the money is locked away. With a savings account you can usually access the money when you want, although you may be penalised if you make too many withdrawals. A term deposit will require you to give written notice and you’ll probably lose some or all of your interest if you make a withdrawal. The other big difference between term deposits and savings accounts is that term deposits have fixed interest rates, whereas savings accounts have variable rates. This means that your interest can go up as well as down according to the cash rate. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.