6-Month & Short Term Deposit Rates

What is a six month term deposit?

It’s all in the name when it comes to a six month term deposit, allowing you to invest your savings with the security of a fixed interest rate over the course of a six month period.

During this six month period, your savings is locked away with the power of simple and compound interest allowing your money to work for you without effort on your behalf. The catch however is that you generally will not have easy access to this money, unless you’re willing to pay a penalty fee for early access.

In recent times off the back of consecutive increases to the cash rate throughout 2022, six month term deposit rates offered by both major and mutual banks, credit unions and building societies have soared to compete with the rise in savings account rates. However before settling on a term deposit product to help achieve your savings goals, it’s important to shop around for products offering competitive rates with no fees.

Six month term deposit vs savings account

Six month term deposits can offer a great way to save money in the short-term with the security of a fixed interest rate. Aside from knowing the amount of interest you will be receiving on your deposit, term deposits can be handy for those who may be tempted to dip into savings if an expense arises. This is particularly the case given savings accounts are more often than not linked to everyday transaction accounts in order to achieve a boosted savings rate.

As an example, say you were planning to purchase a new car in the second half of the year and have already put aside a significant deposit. Opening a six month term deposit could allow you to lock this amount away with the added benefit of earning interest, meaning you can then begin saving for something else down the track such as a holiday.

Aside from periods of six months, longer term deposits can be more popular given they provide a higher interest rate across terms ranging from one to five years. Despite coming with a higher interest rate, your savings are locked away for a more pronounced period of time, potentially leaving you worse off if you ever need to access the funds.

Savings accounts on the other hand provide greater flexibility, allowing money to be deposited or withdrawn generally at any time. Interest rates on savings accounts are variable, not fixed, meaning providers can change them at will depending on external factors such as the cash rate. This can be beneficial for savers in a rising interest rate environment but can be a negative when rates are falling.

When is interest paid on a six month term deposit?

Determining when interest is paid on a six month term deposit ultimately comes down to how the deposit is structured by the bank or credit union. Generally when it comes to term deposits, interest can be paid monthly, quarterly, semi-annually, annually or at the end of the term. With a six month term deposit, interest is typically calculated either monthly or at the end of the term.

Savings.com.au’s two cents

For savers looking to store away savings for a period of time, a six-month term deposit could strike a balance between interest rate security without unnecessary risks. Navigating the term deposit market to find a fee-free product with a great interest rate can allow you to invest your savings and reinvest the interest every six months to continue growing your wealth. It’s important to remain on top of the interest rate you receive for the six months in comparison with the offerings from other banks, credit unions or building societies as there may be better options available once your term finishes. If you do not do anything with your deposit once it reaches maturity, you run the risk of having it roll over for another six months. This can mean waiting longer before switching to receive a better interest rate.