Term Deposits

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What is a Term Deposit?

A Term Deposit is a bank account designed for investing money for a set period of time for a pre-defined return. The term is the length of time for which your money is locked away. Term Deposit accounts can have terms of several months up to several years – at Gateway Bank our Term Deposit accounts are available for terms of 3 months up to 5 years. Term Deposits are also referred to as Short Term Deposits, Long Term Deposits, Fixed Term Deposits or Term Deposit accounts. Term Deposit accounts typically earn higher interest than other savings accounts as funds generally cannot be accessed early by the account owner without incurring a penalty. In some cases a notice period is also required, which means you may not be able to have the funds on the day you ask. You can read more about our interest rates for Term Deposits here.

How can I check the balance of my Term Deposit?

As a Gateway Bank Member, you can check the balance of your Term Deposit account whenever and wherever you want to! We offer three convenient ways to check your balance and the interest earned on your Term Deposit.

• Online banking – Sign into Online Banking to view your balance, check your e-statements and manage your bank accounts
• Phone banking – Call 1300 302 474, select “1” for telephone banking and follow the prompts to check your Term Deposit balance.
• The Gateway Bank app – Keep track of your account balance, add billers and payees, search transactions and more with the handy Gateway Bank app.

The good thing about any Term Deposit is that you know exactly how much interest you’ll earn before you deposit your money. Unlike other higher-risk investments, with a Term Deposit, you can absolutely count on your savings to grow on schedule. When you’re saving up for a big-ticket item like a house deposit or relying on your interest as a form of passive income, knowing in advance exactly how much money you’ll earn is invaluable.

How long does a Term Deposit last?

Term Deposits can last from one month to several years. Term Deposits of less than 1 year in length are considered short Term Deposits, while anything over a year is a long Term Deposit. At Gateway Bank, we offer our members short Term Deposits of 3 months right up to long Term Deposits of up to 5 years.

The length of your Term Deposit is entirely up to you – you can choose from any of the options we offer. It’s important to consider your savings goals and your everyday expenses when choosing the length of your term. Make sure whatever money you set aside is surplus to requirement and won’t be missed from your regular budget.

You can use our Term Deposit Calculator to determine how much interest you will earn based on your deposit amount, interest rate and investment term. If you’d like more information on the Gateway’s Term Deposit lengths, you may like to talk to one of our team members.

What are the benefits of investing in a Term Deposit?

There are a wide range of benefits to opening a Term Deposit account. Term Deposits are known to be one of the safest and most secure ways to earn steady interest on your savings, and with higher interest rates available than other kinds of savings accounts, they’re a guaranteed way to make a sound return on investment.

#1. Guaranteed returns

Unlike other investments, a Term Deposit gives you an absolute guaranteed return (provided you leave your money in the account for the entire term). With a fixed interest rate and fixed term, you’ll know how much you will have earned by a certain date and can plan accordingly, whether you’re saving for a house deposit, looking for an investment for your SMSF, working towards a savings goal or funding your retirement.

#2. Low-risk

A Term Deposit is a lower risk investment than other options like stocks or investment properties. Firstly, with a locked-in interest rate, you know what you’re expected returns are and secondly, your deposit is guaranteed by the Australian Government up to $250,000 per account holder.

#3. Low-maintenance

With a Term Deposit account there’s no need to anxiously track your investment’s progress. A Term Deposit allows your interest to quietly accumulate without any major decision making from you except at maturity. At maturity you can review your current term and interest rate.

# 4. No unexpected fees

With no monthly fees or startup fees and no hidden costs you can feel confident that your hard-earned money will stay where it belongs – in your account! In fact, as long as you don’t withdraw any funds before your Term Deposit has reached maturity you won’t pay any fees at all.

# 5. Fixed interest rate

With a fixed interest rate locked in place for the length of your Term Deposit you can avoid losing out on earnings when interest rates decrease. Your interest rate will stay the same regardless of what’s happening elsewhere in the market. Bear in mind, of course, that this means your account’s interest rate will also remain the same if market interest rates rise.

#6. Healthy saving habits

A Term Deposit account helps develop good spending and saving habits by preventing impulse purchases. If the bulk of your savings is locked away in a Term Deposit you’ll be less likely to make large, unnecessary purchases and will need to seriously weigh your options before withdrawing any money. Locking money away in a Term Deposit can also help you become better at budgeting by reducing the amount of disposable income you have on hand.

Are there any drawbacks to Term Deposit accounts?

While Term Deposits are a safe, easy hands-off way to earn interest on your savings, there are some drawbacks to opening a Term Deposit account.

• Your money won’t be instantly accessible. Once you setup a Term Deposit, that money is locked away until the term reaches maturity. While your money can be withdrawn, it can take time (with waiting periods of up to 31 days or more) and there is generally a cost in the form of penalties and/or a lower interest rate being applied to the remaining funds. A Term Deposit may not be a feasible option for you if you need to have emergency funds at the ready on short notice.
• No additional deposits. There is no flexibility to top up your Term Deposit once it’s locked in. Once you’ve added your initial lump sum deposit, that's it - you won’t be able to add any additional savings for the length of your term. One way to combat this inconvenience is by opening multiple Term Deposit accounts (minimum amounts apply) with staggered maturity dates, or a high-interest savings account may be a preferable option for those who want to save money without locking it away.
• Locked-in interest rate. Term Deposits have fixed interest rates which means if the market interest rate rises above your Term Deposit rate, you won’t benefit from additional interest. This is particularly risky for long Term Deposits. Conversely, if interest rates drop during your term, you will benefit from a higher interest rate than the market level. This is something to consider with Term Deposits.

Is a Term Deposit right for me?

Term Deposits are a popular alternative to a savings account thanks to their guaranteed returns and secure nature. Whether a Term Deposit is the right choice for you depends on your financial situation and personal saving habits. As a general guide, a Term Deposit account may suit you if any of the following apply to you.

• You’re looking for a safe, cash-only investment. A Term Deposit eliminates the risks associated with investing strategies such as stock trading or property investment. While it may yield lower dividends than other investments, a Term Deposit also removes the risk of losing your entire investment.
• You manage a SMSF or trust account. With Gateway Term Deposits available for individuals, SMSF and trust accounts, secure your investment with your first $250,000 protected by the Australian Government Deposit Guarantee. In the case of joint accounts, each account holder is entitled to an individual guarantee of up to $250,000.
• You want a simple, stress-free way to begin saving. A Term Deposit is an excellent option for new savers to get started because it’s both low-maintenance and safe. You can essentially set and forget your Term Deposit account and collect your earned interest when it reaches maturity. You don’t need to pay attention to the stock market or worry about managing your property portfolio. As a sound entry-level saving strategy Term Deposits are popular with many burgeoning Australian investors.
• You’ve got a large chunk of money that you don’t need right away. If you’ve received an unexpected windfall in the form of a bonus, a lottery win or an inheritance, a Term Deposit can help you both store and grow your money. A Term Deposit can be a great place to invest funds that are surplus to your usual budget as it passively earns income for you.
• You’re working towards a future savings goal. If you’re saving up for a new car, a house deposit, a holiday or any large financial goal, a Term Deposit account can help get you there faster. You won’t be tempted to dip into your savings for everyday purchases and you’ll have grown your investment when your Term Deposit reaches maturity.
• You find it hard to save or you’re prone to impulse spending. It’s tempting to make expensive purchases when you have money sitting in an everyday savings account within easy reach. By locking a lump sum away in a Term Deposit account you’ll be less likely to make unnecessary purchases.

 
Want to find out whether a Term Deposit account is the best savings option for you? Talk to one of our friendly team.

What if I need to remove funds from my Term Deposit?

You can remove all or part of your funds from your Term Deposit account, however, an interest rate adjustment will apply. The adjustment will depend on the length of the agreed term that has been served. The longer you leave the funds in your Term Deposit the smaller the adjustment.

We highly recommend carefully considering your financial situation before opening a Term Deposit account and factoring in any emergency or rainy day funds you may need in the future to avoid the need for removing money from your Term Deposit wherever possible.

It’s also important to note that waiting periods may apply to early withdrawals from your Term Deposit. There is a 31 day notice period for new 5 and 12-month Term Deposits which must be observed before you can access your funds. Please take this into consideration when selecting your Term Deposit account.

Are Term Deposits suitable for Self Managed Super Funds?

Term Deposits are often used by people with Self Managed Super Funds (SMSF) as a safe and reliable investment. Many people choose to invest a certain percentage of their superannuation earnings into a Term Deposit, or multiple Term Deposits as a safeguard for their savings. They usually combine this with a range of other investment options such as stocks.

How often is interest paid on a Term Deposit?

The frequency with which interest is paid on a Term Deposit varies depending on the account. For terms of 12 months or more, interest can be paid monthly, half-yearly or annually. For terms of 12 months or less, the interest can be paid monthly or added to the principal at maturity. At Gateway Bank we offer our Members the flexibility to choose a payment frequency that suits them along with customisable term lengths and a low minimum deposit of $1000.

What happens when my term reaches maturity?

Once your Term Deposit reaches maturity, you can either have the money credited to you or you can choose to reinvest it. Your deposit will be paid out in full with both the principal deposit and interest earned returned to you at maturity. These are the payment options we offer at Gateway Bank once your term reaches maturity.

• Reinvest it – You can reinvest your principal and interest into another Term Deposit
• Paid by cheque – We can deliver your principal and interest to you via cheque
• Credited to your account – We can credit your principal and interest directly to your nominated Gateway Bank account.

What is the Australian Government Deposit Guarantee?

The Australian Government Deposit Guarantee, or AGDG, is offered under the Financial Claims Scheme (FCS) and protects all deposits of up to $250,000. To qualify for this protection, the deposit must be made with an authorised deposit-taking institution (ADI), which can be a bank, credit union, building society or other financial institution. The guarantee effectively insures the deposit in the unlikely event that the financial institution goes under. In the case of joint accounts, the guarantee is valid for every holder, with each contributor to the joint account eligible for protection up to $250,000.

At Gateway Bank, we are an Authorised Deposit-taking Institution (ADI) meaning each of our Term Deposits and other bank accounts are covered under the FSC. This means we offer the security of the big banks with the customer-centric focus of a small Member-owned bank.

We’ve been in operation for over 50 years, and are regulated by the Australian Prudential Regulatory Authority (APRA), just like the big banks. You can feel comfortable knowing that your deposits are protected with the Government Deposit Guarantee when you bank with Gateway. As well as our Term Deposit accounts, the following accounts are protected under the ABDG.

• Everyday Banking Accounts
• Savings Accounts
• Investment Accounts

How much do I need to invest for a long Term Deposit?

We require a minimum deposit of $1,000 for all Term Deposit accounts. There is no maximum limit on the amount of money you can deposit in a Term Deposit account, however, it’s important to note that the Australian Government Deposit Guarantee will only insure deposits of up to $250,000. If you want to deposit more than this, you may want to consider opening several Term Deposit accounts.

A Term Deposit account requires a single lump sum deposit. Unlike other savings accounts which allow unlimited deposits, a Term Deposit stipulates that you can only deposit once, at the beginning of your term.

How much interest will I earn from a Term Deposit?

The amount of interest you earn from your Term Deposit will depend on:

• The amount of money you invest
• The interest rate
• Whether your interest is simple or compounding
• The term, or length, of your deposit

 
Read more about our interest rates and use our Term Deposit Calculator at the bottom of this page to work out how much you could earn.

Who can open a Term Deposit account?

At Gateway Bank, Term Deposits can be opened by individuals, SMSF holders and trust account trustees.

• Individuals – Any eligible person over the age of 18 may open a Term Deposit account.
• Self Managed Super Funds (SMSF) – Term Deposits make a safe, secure investment option for SMSFs. People with SMSFs often keep a proportion of their fund in a low-risk Term Deposit and use a predetermined percentage of the fund to invest in higher-risk investments such as stocks.
• Trust accounts – Term Deposits are commonly used for trust accounts, especially parents or grandparents depositing money for their underage children. Many people choose to put money in a Term Deposit which will mature when their child or grandchild turns 18 or 21.

9 Tips for choosing the right Term Deposit Account

If you’re considering opening a Term Deposit account there are a number of important factors to consider.

#1. Interest rate fluctuation

A Term Deposit locks in an interest rate for the length of your term. Interest rates go up and down periodically, and if you have locked into an interest rate you may not benefit from higher rates. Conversely, if interest rates drop your deposit will earn higher interest than otherwise.

#2. Inflation

Your long Term Deposit interest rate needs to be higher than the inflation rate in order to earn money, especially if the term period is several years.

#3. Term length

Once you’ve locked your money away in a Term Deposit account it will be costly and time-consuming to remove, so consider the length of time you want to deposit your money for. How is your life likely to change during the term? Will you have enough money for emergency expenses without needing to time money from your Term Deposit?

#4. Diversifying your investments

A Term Deposit is a safe, guaranteed way to earn money, however, there are other faster and more lucrative ways to earn a return on your investment. For instance, investing in shares or buying an investment property may yield much higher returns, but you also risk losing everything if the stock price plummets or the housing market falls. A Term Deposit is a safe, slow-and-steady option which many investors choose to pair with other higher-risk investments.

#5. Early withdrawal penalties

If you need to remove money from your Term Deposit account before the term has reached maturity you will be required to pay a penalty. This will take the form of an interest adjustment, which means your money will earn less interest for the remainder of the term.

#6. Make a budget

Locking away a large amount of money can mean you have less wriggle room for everyday purchases. The best way to prepare for this is to have a budget and strategy in place to ensure you’re not short on funds throughout your term. Take a look at your weekly expenses such as groceries, rent bills, subscriptions and petrol and work out how much money you have leftover for discretionary spending. It’s also worth identifying and eliminating any unnecessary expenses for your spending to ensure you aren’t left short and don’t need to take money from your Term Deposit.

#7. Plan for emergencies

Term Deposits are made with the intention of leaving that money locked away for months or years, but sometimes things don’t go to plan. This is why it’s wise to have an additional savings account on hand that's easily accessible in addition to your Term Deposit. Creating a separate savings fund for emergencies will ensure there’s money available for things like unexpected car repairs, home maintenance, medical expenses and other unforeseen costs.

#8. Get a preview

When deciding the parameters of your Term Deposit look at the interest rates available and whether the interest is paid monthly, periodically or at maturity (the end of the term). At Gateway Bank, we offer a handy Term Deposit calculating tool which allows you to adjust your investment amount, interest rate and term length to view how much you’ll save with different Term Deposit accounts.

#9. Seek professional advice

A Term Deposit account is a safe and secure way to earn passive interest, but the idea of locking away a large chunk of money can feel daunting. For advice on how much to set aside, how long the term should be, which payment schedule is best and more, talk to a financial planner. They’ll give you personalised advice on how to make the most of your savings while comfortably budgeting the rest of your funds.

Term Deposit: A Term Deposit is a savings account which involves setting aside a lump sum of money for a predetermined period. A Term Deposit effectively locks away a sum of money, ensuring it can’t be easily accessed by the account holder. Waiting periods, fees and penalties usually apply if an account holder removes funds before the term has reached maturity. Term Deposits typically offer higher than usual interest rates as compensation for leaving money in the account long-term.

Long Term Deposit: A long Term Deposit is a savings account where a sum of money is locked away for a predetermined period. To be classed as a long Term Deposit, the term needs to be 12 months or longer. At Gateway Bank, long Term Deposits last for one to five years.

Short Term Deposit: A short Term Deposit is a savings account where a lump sum is set aside for a designated time period. To qualify as short term, the term needs to be less than 12 months. Short Term Deposits at Gateway Bank last for 3 to 12 months.

Maturity: Maturity refers to the end date of a Term Deposit. The capital and interest of the Term Deposit can only be removed once it reaches maturity.

Capital: The amount of money initially deposited in the Term Deposit.

Interest: The interest earned on the Term Deposit.

Compounding Term Deposit: A compounding Term Deposit account involves reinvesting the interest earned back into the Term Deposit. Compounding Term Deposits typically offer lower interest rates than standard Term Deposits.

Standard Term Deposit: Standard Term Deposits do not reinvest the interest earned on the deposit amount but instead pay it out as a cheque or direct deposit into a different bank account. Standard Term Deposits typically earn higher interest than compounding Term Deposits.

Minimum deposit: The minimum amount of money required to open a Term Deposit account. At Gateway Bank, this amount is $1000.

Laddering: The process of opening multiple Term Deposit accounts with staggered end dates. This allows the owner to collect the capital and interest as regular payments. This technique is popular for retirees and people living off their interest.