What is a term deposit?

Are you interested in a term deposit, but not quite sure where to start? Here’s what you need to know and what to look for, to help you decide if it’s the right option for you.

What is a term deposit and how does it work?

A term deposit is a way to invest your money, by locking away a lump sum of money for a set period of time (term), at a fixed interest rate. If you’re saving for something significant and you don’t need quick access to the funds, or you want certainty about the amount of interest you’ll be earning, it could be an option for you.

You choose the term (amount of time) the money is locked away for. The term deposit interest rate differs, depending on the term. Generally, you will need a minimum opening deposit. At People First Bank, we offer a Term Deposit. You can choose a term ranging from two months to five years. Our minimum opening deposit is $5,000, or $1,000 if you’re under 25.

For a Personal Term Deposit of one year or more, you can choose to have interest paid monthly or annually. The interest can be reinvested, or paid into a People First Bank transaction or savings account.

If your Term Deposit is less than one year, the interest will be paid at maturity (the end of the term). The interest rates differ depending on the term, so make sure to check the term deposit rates before making your decision.

At People First Bank, you can keep track of your term deposit and check it at any time using Online Banking or our People First Bank App.

At the end of your Term Deposit (maturity), the funds automatically renew into the same term at the interest rate available at that date. You have a period of seven days where you can make changes including withdrawing part or all the funds, adding funds or choosing to renew into a different term and rate.

Term deposit vs savings account

You may be wondering what the difference is between a term deposit and a savings account.

With a term deposit, you’re locking away a lump sum of money for a fixed interest rate, and for a fixed term. That means you can’t add money to it, like you can with a savings account.

A savings account also has the potential for interest rate changes, and these could go up or down. With a term deposit, the interest rate you locked in at the beginning of the term won’t change.

If you think you might need quick access to your money, a savings account could be a more suitable option. This is because if you withdraw your term deposit early, you will likely need to give your financial institution a notice period and may be charged a penalty fee.

Are term deposits safe?

A term deposit is a low-risk investment option because you have certainty of the interest rate and therefore the returns you’ll be getting. You also know how long the investment is for.

All People First Bank deposits are also protected by the Australian Government’s Deposit Guarantee, which is part of the Financial Claims Scheme (FCS). This provides protection of up to $250,000 for each account holder at Australian financial institutions (known as authorised deposit-taking institutions or ADIs), in the unlikely event that one of these financial institutions fails. People First Bank is one of the ADIs covered by the scheme. You can find the list of all ADIs that are covered by the FCS here.

Open a Term Deposit with People First Bank

You can do this by calling 13 11 82 or visiting your nearest branch.

If you’re already a member with us, you can do this from within your Online Banking or People First Bank App by following these steps:

• Click on Apply in the main menu;
• Select Account from the drop-down;
• Complete the Account Open Request online form.

You can also call us on 13 11 82 or visit your nearest branch.