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Term Deposit
A term deposit is a savings account held in a financial institution for a fixed term, and usually at a fixed interest rate.
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Just as the name suggests, term deposits tie up your funds for a term, or period of time, whether its 30 days, 90 days or two years. If you need to pull your money out for an emergency, they’ll clog you with a break fee. So term deposits are solely intended for funds that you don’t need for a set period of time. The interest rate you receive is fixed for the term, so if the RBA decides to drop rates during the term then it won’t affect the rate you receive. Contrary to what you may think, a longer term doesn’t necessarily translate into a higher interest rate. A term deposit may offer a tiered rate – the longer the term, the higher the interest rate – to 1 year, but then the rate offered declines. Interest is mainly paid at maturity.
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