Saving for a holiday? A house? A major life event? Or just for a rainy day? There are a few options when it comes to making the most of the money you have, each with slightly different pros and cons. The two most common pathways are either a term deposit or a bonus savings account.
We’ve put together some pros and cons of each to help you weigh up which one is right for you.
Fixed term deposits offer a guaranteed rate of return on your money for the life of an investment. They are also a low maintenance option, you can just set and forget!
- Your savings are locked away, which means you won’t be tempted to touch it
- You’ll commonly get a higher interest rate than online savings accounts
- Interest rate remains fixed for a set period so you’ll be able to calculate how much you’ll earn
- At Bank Australia, you have the choice of monthly interest or interest at maturity (the end of the agreed term e.g. 6-months)
- Fees can apply if you wish to access your savings before the term deposit matures
- You don’t benefit from interest rate rises, say if rates rise mid-term (which is why most people opt for a 3 or 6-month term.
Bonus savings account
More often than not, bonus savings accounts offer a base rate of interest as well as bonus interest if you stick to the withdrawal/deposit conditions of the account. Most banks offer these types of accounts but with varied interest rates. At Bank Australia you can earn up to 2.60% interest with a Bonus Saver.
- You can earn a high rate of interest on a small balance – start with $100 and build from there with a $100 a month deposit
- Your savings are accessible if you do need them (but you lose your bonus interest)
- Getting bonus interest can encourage you to save if don’t make any withdrawals and deposit a minimum of $100 during the month.
- Interest rates on savings accounts are typically lower than fixed term deposits and they can change at any time.
- If you access your funds during the month, your forfeit bonus interest. Base interest rates are generally low, so your return could be modest.