6 month term deposits

A 6 month term deposit is a type of investment for your savings, where you lock away your money for six months and get a fixed interest rate in return. 

A 6 month term deposit is just one period of time (the term) you can choose from. Most banks will have other terms available ranging from between 1 month up to 5 years.

You might choose a 6 month term deposit if you’re interested in safely growing your savings over a short term, or you’re feeling wary of locking away your cash for any longer than a year.

A 6 month term deposit can also be a good choice for those who want to benefit from any potential interest rate rises, which those locked into a longer term would miss.

Pros and cons of a 6 month term deposit

Pros

• Secure investment: The Australian Government guarantees term deposits of up to $250,000 with authorised deposit-taking institutions (ADIs) such as banks, credit unions and building societies. Your money’s secure if anything happens to your ADI, making it a low-risk investment (unlike shares or property).
• Guaranteed return: Term deposits come with fixed interest rates, so you’re guaranteed a return on your investment. Not only that, you’ll also be able to calculate exactly how much you’ll earn by the end of the 6 month term.
• Little work required: A 6 month term deposit allows you to sit back and easily grow your savings with little to no intervention required. Unlike some high interest savings accounts, you don’t need to meet any conditions to get your interest rate.
• Option to re-invest: You’ve got the ability to re-invest at the end of a 6 month term, which means you could benefit from any interest rate rises if they occur. With a long-term deposit, you’re locked into the same fixed rate for longer.

Cons

• Lack of flexibility: If your circumstances change and you have to withdraw your funds before your term deposit matures, you may have to pay an early withdrawal fee and you won’t receive the interest you’d earned.
• Can’t add to your deposit: Once you’ve put your savings into a term deposit, you cannot add to the funds until the term has matured. Once your term deposit has matured, you’ll need to lock into a new term if you want to re-invest.
• Interest rate increases: If interest rates increase during the 6 month period of your term deposit, you will not benefit as your interest rate is locked in.
• Automatic rollover: Beware of automatic rollover once your 6 month term deposit matures – it may automatically rollover into a new 6 month term deposit at a lower rate so make sure you compare term deposits prior to the end of the term.

Source: mozo.com.au as at 24 April 2024, leading maturity 12 month term deposit rates at $10,000 balance.

What happens when a term deposit matures?

When your term deposit matures, it has reached the agreed date when your investment is set to end.

Your bank, credit union or building society will contact you in the weeks leading up to the maturity date to notify you on how much interest you’ve earned and what your options are.

You’ll have the choice of withdrawing your money, moving it to a savings account or signing up for another term deposit.

When is interest paid on a 6 month term deposit?

Exactly when interest is paid on a 6 month term deposit will vary across providers, as interest can be paid monthly, quarterly or on maturity. However, a 6 month term deposit is likely to be calculated monthly or at the end of the term, but talk to your provider if you’re unsure.

What features to look for in a term deposit

The key features to compare term deposits on include:

• Interest rate: Term deposits have a fixed interest rate which you lock in at the start of your investment, and the higher the interest rate, the better your return will be. You should also consider when interest is paid on your term deposit. If it’s paid monthly, you’ll earn compound interest, whereas if it’s paid at maturity, you’ll just earn interest on your initial deposit.
• Investment term: Term deposits are investments that are restricted by a set amount of time, and the term can range from 1 month up to 5 years. Before putting your savings into a term deposit, compare the interest rate over various investment terms.
• Fees: Term deposits generally don’t come with set up fees, but expenses can arise if you need to terminate your term deposit early. You may need to pay a withdrawal fee if you want to access your money before your term deposit has matured, or you may forfeit any interest you had accrued.
• Your projected earnings: You can get an idea of just how much interest you’ll earn before locking your money away in a term deposit by using Mozo’s term deposit calculator.

Term deposit vs savings account