As their name suggests, term deposits are a way of depositing your money in the bank for a specific term or time frame. It could be anything from a few months to a few years. A term deposit can be handy if you have a large amount of money you won’t be using for a short time, such as in the selling and buying of a home.
It should only be used if you are sure you won’t want that money before the term is up. Not that you won’t be able to access it, but you’ll lose all the benefits and may have to pay a penalty if you break the term. But for the agreed time of the term your interest rates will stay the same. The interest on a term deposit is usually higher than on an ordinary savings account. It is locked in at that rate, so that even if interest rates should fall, the interest rates on your term deposit will remain the same.
You may have options on some term deposits as to whether your interest is paid to you or paid back into the term deposit each month so you can have the benefit of compounding interest. Some term deposits don’t let you accrue interest monthly, but rather, it is paid at the end of the term.
A term deposit can be handy if you have a large amount of money you won’t be using for a short time, such as in the selling and buying of a home. You may have options on some term deposits as to whether your interest is paid to you or paid back into the term deposit each month so you can have the benefit of compounding interest. Some term deposits don’t let you accrue interest monthly, but rather, it is paid at the end of the term. It should only be used if you are sure you won’t want that money before the term is up. Not that you won’t be able to access it, but you’ll lose all the benefits and may have to pay a penalty if you break the term.
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