Term deposits are one of the most popular ways of earning money on your savings, especially if you don’t want to take a chance with high risk investments like the stock market. On the other hand, regular savings accounts have fluctuating interest rates and your money is always available, making it more tempting to spend.
The interest rates offered on term deposits are usually calculated on the current market rate and won’t drop for the duration, even if the current interest rate does. There is no reason why you shouldn’t shop around to ensure that your money is going to get the highest term deposit rate possible.
Bigger does not always mean better
When you are considering which bank to trust your savings to you are most likely to consider one of the bigger banks. However, there are smaller banks where your money is just as safe, but they offer better deposit rates in order to attract business. These include community banks, challenger banks, and credit unions that often run with less overheads. They pass on these savings to their customers by offering better rates.
In what ways do banks offer special deposit rates?
Banks use various ways to offer their customers better interest rates on their savings and term deposits.
Some banks will offer new customers a much higher interest rate for the first few months of their term deposits in an attempt to get you to move your savings over from another bank.
Banks also want to keep their existing clients and may offer you an increased interest rate at the end of your maturing term deposit in order to prevent you from leaving for another bank.
What else can you do to get better interest rates?
Besides the special offers made by the banks to attract new customers or keep existing ones, there are also other ways that you can achieve better rates for your savings.
Choose to save for longer
Banks need cashflow and the longer you choose to leave your money with them the better it is for them. That means that if you don’t need the money in the near future, they will offer you better deposit rates for longer periods, especially if these exceed 2 years.
Keep in mind this option is only wise if you won’t need to withdraw the money before it reaches maturity. You will most likely be penalized with both a withdrawal fee and a reduced interest rate in most cases of earlier withdrawals.
You do have the powers to negotiate a better deal
Surely if you approach your bank for a loan to buy your car or home you will try and negotiate the best lending rates with them. That is exactly how you must approach the rates for your term deposit too, since banks need deposits for the credit lines they offer to other customers. The bigger the amount you have available and the longer you are prepared to fix the deposit for, the better your negotiating strength will be.
Choose how often you receive your interest rates
Depending on if you want to receive your interest payments monthly, quarterly or annually, then you will also see a difference in your term deposit rate. The best rates are usually achieved if you opt to get the interest payment on the maturity of your term deposit.
Shop around and use retail tactics
Research what all the banks are offering and see if you can get the bank that you are interested in to match the best rates out there. If you don’t ask, then you won’t know if they will be willing to give them to you.
Savings styles are all very different, so when you choose your term deposit consider yours carefully and choose wisely. Keep in mind that you will have to compare the different rates according to the other terms of the deposit. Banks usually have a minimum deposit amount that ranges from $1,000 to $5,000.