Term deposit interest rates are on the rise - are they smarter than savings accounts?

Term deposits allow you to earn more interest on your idle cash. Alex Brooks asks if term deposits are a smarter alternative to savings accounts ...

When I was a little kid, interest rates were high. It wasn't good for mortgage-holders, but for a little kid stashing her birthday and Christmas money, I couldn't believe you got 'free' interest just by putting the money in a bank account.

Then I discovered term deposits - a 'stricter' way to put your money in the bank for a certain period of time in exchange for a higher interest rate. I was even happier!

Until one day I needed to access my 6-month term deposit earlier than anticipated and I had to forego my 6-months of interest for a penalty fee and a loss of interest. It took the air out of my tyres, that's for sure.

But AMP deputy chief economist Diana Mousina - who writes a weekly investment update for kids who grow up and are still interested in graphs - says term deposits are now returning between 4-5%.

This makes them look more attractive than leaving your money in a transaction banking account, where interest rates can be as measly as 0.5%.

CHOICE has recently updated its high-interest savings accounts recommendations - and there are some good options on the CHOICE list.

But is it time to look at term deposits to eke more interest from lazy cash?

Take a look at Canstar's comparison list of term deposits - the interest rates for term deposits are exactly as Diana Mousina suggests ... but not from the Big 4 banks.

With high-interest savings accounts and term deposits, it pays to look around for the banks and ADIs (that's authorised deposit-taking institutions) that don't have as big a market share as they tend to offer high rates for savers and investors.

What's your view on term deposits? Do you use them - or do you prefer to keep your money liquid and at call in a transaction account?

_{Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.}

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