Term deposits with special rates

Term deposits are seen as a good choice among risk-averse investors: you get to store your money away in an account for a specified period of time, and at the end of that term you get a nice lump sum of interest as well as your money back.

The problem is, that lump sum can be too little for some. It’s perfectly understandable to view a rate of less than 2.00% p.a as not worth your time.

However, there are some term deposits on the market that offer ‘special’ (higher) interest rates to depositors that meet a particular set of criteria, which this article will explore.

What is a special term deposit rate?

A special term deposit rate doesn’t technically have a set definition, but you might call it one that sits outside a bank’s usual range of interest rates for term deposits. A special term deposit rate is usually a fair bit higher than most other term deposit rates, and usually can only be earned by those that meet a set of requirements. For example, to qualify for the special rate, you might need to:

• Deposit a larger amount of money (usually a couple of hundred thousand)
• Be a new customer
• Earn a certain amount of money each year
• Have to accept that interest can only be paid at maturity

Let’s take a look at the most prominent example of a special term deposit interest rate we could find: the Citi three-month term deposit, which offers an interest rate of 2.88% p.a. for three months (as at February 2019).

Compared to other products on the market:

• Citi’s next highest interest rate is 1.80% p.a.
• The highest interest rate according to our highest term deposit rate comparison (as at February 2019) is 2.35% p.a, for Judo Bank’s five-year deposit

The tables below display a collection of some of the highest term-deposit rates on the market. These are not special interest rates.

So Citi’s 2.88% p.a. interest rate is comfortably one of, if not the highest interest rate around, but not everyone can get it. Per Citi’s website, only ‘eligible’ or ‘wholesale’ investors can get this term deposit. This means:

• You must have a certificate issued by a qualified accountant in the last two years
• You have a gross household income of $250,000 for each of the last two financial years; or
• You have net assets of at least $2.5 million

Other term deposits, on the other hand, will have much less stringent requirements, often allowing customers to deposit funds with amounts as low as $1,000. So while these rates might be enticing, you generally have to be pretty well off to get them.

How much of a difference can these special rates make?

Let’s say you have $250,000 to invest and decide to put it in a six-month term deposit. A 2.88% interest rate would earn you much more interest than a rate of say, 1.88%.

How do I find special term deposit rates?

Unfortunately, these kinds of term deposit rates are pretty rare, and with rates as low as they are at the moment, not too many providers are offering these special term deposit rates. The Citi product mentioned above seems to be the exception rather than the norm - our list of highest rate term deposits is about as good as it gets.

You can always search for high-rated term deposits and contact the bank to ask what kind of special rates they offer, as they might not advertise these high rates on their websites. Some banks might be willing to offer higher rates on the down-low, but again, you’ll probably need to have a high income and be willing to deposit a large amount of money.

You can get a slightly bigger interest rate on your term deposit by taking advantage of a loyalty bonus…

How else can you get a higher term deposit rate?

Term deposits are a pretty rigid and inflexible product, but a term deposit loyalty bonus is a little bit of interest you can get on top of the advertised term deposit rate at the end of your term. If you had a one-year term deposit at 2.00% p.a. and decided to renew (aka roll over) that term deposit once it reached maturity, there’s a chance you could receive a loyalty bonus of around 0.10% p.a.

There are some flaws with this. First of all, not all term deposit providers offer this bonus, and secondly even with a 0.10% increase it might not be worth sticking with a term deposit, especially if its interest rate fell while you had it.

According to Savings.com.au’s research, the four most prominent loyalty bonuses on term deposits are offered by:

• UBank: 0.10% for standard, green and SMSF deposits when you roll over your deposit at maturity
• Rabobank: 0.10% when you reinvest your term deposit before maturity
• Judobank: 0.10% on top of the standard rate if you rollover at maturity
• LCU: 0.10% on top of the standard rate at maturity

Read our article on term deposit loyalty bonuses for more info on the pros and cons.

Savings.com.au’s two cents

Ultra-high term deposits rates would be nice to have, but your everyday customer (which might be you) is unlikely to be able to qualify for one. If you meet the requirements then great, but if not the best way (in our opinion) you can find the highest term deposit rate is to look for one yourself. There are dozens of banks out there offering term deposits, and rates in excess of 2.00% p.a. are still available if you look hard enough.

Your current bank might not offer the best rate either, and remember to check your term deposit as your investment is about to reach maturity. Your term deposit might automatically roll over, leaving you stuck with a lower interest rate than you could get elsewhere.