Nick Bruining: The best term deposit bank savings rates, where to find them and the fine print
While investors have been warned to be wary of private credit funds, there’s still reasonable money to be made parking your cash in bank accounts.You just need to know where to look.
While investors have been warned to be wary of private credit funds, there’s still reasonable money to be made parking your cash in bank accounts.
You just need to know where to look and what fine print to avoid.
In this case, the fine print isn’t about increased risks for investors, but lower rates if you leave the money unattended or fail to follow the rules.
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Data insights director Sally Tindall said investors should be prepared to shop around.
“As competition for deposits continues, regular product changes are a timely reminder that loyalty doesn’t always pay,” Ms Tindall said.
“Savers who regularly compare their options may be better placed to maximise their interest earnings.”
As of last week, investors can earn up to 5.55 per cent a year on a 10-month term deposit with Defence Bank.
The best overall returns are generally offered by the online accounts, and can’t be accessed by walking into your local branch.
ING Direct, for example, is offering a new savings account paying a whopping 6 per cent a year for the first four months on balances up to $500,000.
After that, the rate drops to 5.4 per cent — but that requires you to continue adding $100 a month to the account. If you fail to meet that requirement, the “base rate” is 2.25 per cent. This is a good example where failing to meet the conditions can mean you miss out.
Macquarie Bank, on the other hand, offers an introductory rate of 5.35 per cent for the first four months, reverting to 5 per cent for balances of up to $2 million. In this case, there’s no requirement to make regular deposits to the account.
Unlike term deposits, both of these accounts are “at-call”, meaning you can access the money at any time.
And unlike private credit-type accounts, these accounts are covered by the Federal Government’s financial claims scheme.
This scheme essentially provides a deposit guarantee of $250,000 per account holder per financial institution that is classified as an authorised deposit-taking institution. ADIs include all banks, building societies, credit unions and online banks operating under an Australian banking licence.
In essence, this guarantee puts a deposit invested with a rural-based credit union on the same footing as a deposit with one of the big four banks.
Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association
