Term Deposits

[AGIT8D]

What's good?
What's bad?
What's to know?

Don't want to throw dosh into a tricky fixed term that doesn't pay what it advertises.. I've had a bit of a hunt around the comparitive sites, looks like you can land high 5's to low 6's for most of the duration (2-3 years).

What are my alternatives? Share market is volatile, do not want. Was going to pour money into mortgage but then I reduce my interest to claim come tax time. As long as the money is working SOMEWHERE for the next house I'm happy.

A few have mentioned offset accounts, but I don't fully understand how they work and how they'd be better than anything else. I am probably going to fix my mortgage in at 3 years and start to pay some capital off it as well which will slightly reduce my interest to claim on tax but not like a lump sum deposit would.

[Turbo2.6L]

Derivatives are something to look into as well Dan. How much kesh we talking??

[AGIT8D]

I will be putting 30k into the TD, so am not expecting miracles, but best I lock it in somewhere otherwise I might wind up on a shiny new jetski this summer.

Could you elaborate on the derivatives ?

[Mad_Aussie]

You could buy like two or three ounces of gold...

[TJ]

One of the Perth WRX guys is a pretty damn good accountant - might be worth getting in touch?

Bust me message on here/fb if you want details.

[Turbo2.6L]

http://www.streetdirectory.com/travel_guide/36505/investment/three_reasons_to_start_derivatives_trading.html

I'm not a full bottle on it myself yet, but all i have heard/researched/seen is very positive. There are still risks, but the rewards are much greater than a term deposit.

[AGIT8D]

I will have a look, Dean, thanks.

TJ, my boss is a wizard accountant also, but I will have to try and find some time to sit down with him and discuss my options.

ING's 2 year fixed term deposit nets me a touch over 3.5k by the end of it. As you could guess I'd be interested in trying to make my money work a little harder than that ;)

[R3N]

Derivatives trading is very risky, as with all trading, but then depends on the underlying asset you are purchasing. You need to be in the know of the market, is it volatile? What information affects the underlying asset's price movements? What is your strategy? Long-term, short-term? Comparing putting money in a TD vs trading is a very different kettle of fish. Sure you can make good money, but then things can go sour in the blink of an eye. With any risky investments, only put in money you can afford to lose. You really need to spend a lot of time researching and you also need the stomach for it. Trading isn't for every one. One of the highest paying jobs are traders, which also has a high level of stress due to risk and frequency of price movements. It's not really something you can do without continuous monitoring of the market.

TDs are a waste of time, depending on duration. Most of the time you can get a pretty good rate just by putting into a savings account. I have an account with UBank which pays 6.51% pa if you set up an auto savings plan which deposits $200 into the account monthly (otherwise its 6.01% IIRC). Also have a Bankwest account that pays 6.30% which is linked to my every day account.

[stumps.]

Invest in a shiny new jetski for loz's finger

[AGIT8D]

Thanks Kuek. Bankwest can get fucked, but I will look into some other options like that.

Benry, Loz and I have our own separate houses, you are jumping into the deep end and buying one with your girly already.. She'll be knocked up and wedded before I even have a term deposit that's made enough money to consider a ring :)

[Joe]

Get one of your bank's high interest online savers.

If its a bank that gives you a high rate for 3 months then drops back to a lower rate, just start up a new one every 3 months so you can keep getting the "bonus" rate. Thats what I do with NAB with our iSaver.

It's very flexible ie can transfer the money in and out as you please, immediately.

[R3N]

Good rate comparison site

http://www.infochoice.com.au/banking/savings-account/list.aspx

Can compare TD rates as well which are looking pretty crap in comparison

[cplagz]

What joe said - high interest online saver account over locked in Term Deposit any day. At least you can access the funds if need be, plenty of places are having "introductory rates" to entice new customers.

[AGIT8D]

Get one of your bank's high interest online savers.

If its a bank that gives you a high rate for 3 months then drops back to a lower rate, just start up a new one every 3 months so you can keep getting the "bonus" rate. Thats what I do with NAB with our iSaver.

It's very flexible ie can transfer the money in and out as you please, immediately.

This looks to be a good option. CBA give me good service as far as bumping my accounts back into no fees and high int rate every time I go in there, and I already have a netsaver acc. Whether they offer the highest int % I'm not sure. I would need to ensure I have it setup to second sign so I can't blow dosh when drunk/otherwise.


Good rate comparison site

http://www.infochoice.com.au/banking/savings-account/list.aspx

Can compare TD rates as well which are looking pretty crap in comparison

That's the first site I checked this morning, thanks homie

[AGIT8D]

What joe said - high interest online saver account over locked in Term Deposit any day. At least you can access the funds if need be, plenty of places are having "introductory rates" to entice new customers.

Any idea if the same banks will let you double dip on those rates if you close an account and set up a new one or leave for 3 months then bring the money back to rinse and repeat?

[Joe]

Yeah of course they do.. I set a new one up every 3 months and transfer it over.

Our NAB business relationship manager has even offered to do it for us automatically every 3 months!! I just need to swap my personal NAB accounts over to that branch and its a done deal.

[AGIT8D]

Nice one, I think that's how I'll play it. Better returns for little work, and access to dosh in case of emergency engagement etc..

[Ryan1080]

Do you have a mortagage just over an investment property, or also on your principle home you live in?

Reason I ask is that offset accounts are heaps better than TD's, if they offset interest against an undeductible debt... interest rates are higher, and you pay no tax on it.

[R3N]

Yeah of course they do.. I set a new one up every 3 months and transfer it over.

Our NAB business relationship manager has even offered to do it for us automatically every 3 months!! I just need to swap my personal NAB accounts over to that branch and its a done deal.

Current iSaver rate shows 5.65%? (incl 1.00% bonus rate), there are other accounts with higher rates that require less work, given that its being done automatically for your, point is somewhat moot, but still, higher rates to be had elsewhere.

[cplagz]

Any idea if the same banks will let you double dip on those rates if you close an account and set up a new one or leave for 3 months then bring the money back to rinse and repeat?


Yeah of course they do.. I set a new one up every 3 months and transfer it over.

Our NAB business relationship manager has even offered to do it for us automatically every 3 months!! I just need to swap my personal NAB accounts over to that branch and its a done deal.

Well this is a point of contention. Some may - but if you read their policies it's generally only an "introductory rate". We had to fight BOQ to get the "intro rate" on a substantial amount of money and even they they only calculated the base rate, not base plus bonus - luckily we picked it up and they have to back pay us on it.....but hell - the accounts aren't hard to setup. I'm looking at a switch to that Rabo 4mth one and then I'll just look again in 4 months time.

Gone are the days of stick your money in the bank and leave it alone as they are all the same - the amount of different products out there these days you would be crazy not to shop around regularly (as I am now finding out more and more).

[AGIT8D]

Do you have a mortagage just over an investment property, or also on your principle home you live in?

Reason I ask is that offset accounts are heaps better than TD's, if they offset interest against an undeductible debt... interest rates are higher, and you pay no tax on it.

I've just got the one property, Ryan. But I may be moving back into the property in Feb to reset my CGT before doing some light reno's and hopefully cashing in and buying in Perth next door to Benry.

Does this circumstance work for or against me? And can I offset against a fixed loan?

[Ryan1080]

I've just got the one property, Ryan. But I may be moving back into the property in Feb to reset my CGT before doing some light reno's and hopefully cashing in and buying in Perth next door to Benry.

Does this circumstance work for or against me? And can I offset against a fixed loan?

Well, while you're not claiming interest (i.e. while you're living there), it's worthwhile having an offset account, for the reasons I mentioend earlier.

I suppose when you have a rental property and you claim the interest on tax, by using an offset account, you reduce your interest expense, and your tax claim. While not ideal from a tax perspective (you're better off eliminating any non deductible loans first, such as car loans, credit cards, personal home mortgage etc.), if you're tossing up between this and a TD, you're still better off doing the offset thing.

If you think about it, whether you earn 5.5% on 30K and pay say 37% tax (or whateevr tax bracket you're in) on the income; or save 7.5% on 30K, and pay 37% tax on the reduction of your tax claim, offset is still a winner for the simple fact that the interest rate is higher.

[AGIT8D]

If you think about it, whether you earn 5.5% on 30K and pay say 37% tax (or whateevr tax bracket you're in) on the income; or save 7.5% on 30K, and pay 37% tax on the reduction of your tax claim, offset is still a winner for the simple fact that the interest rate is higher.

And this is exactly what another accountant friend told me as well. The only benefit to not heaving it directly onto the mortgage is the fact I can access the money, which is sounds like I can still do with an offset account. Provided I can have one with a fixed loan, it may boil down to doing this or swapping my money from bank to bank/account to account quarterly.

[Ryan1080]

It will all depend on whether your bank does offset accounts, and whether it's available with your particular product or not. If not, and they'll ask you to get a different loan with them, and subsequently want to charge you fees and other crap, then there's probably no point lol. Look at the whole picture before you commit to anything.

But yeah, I've always considered TD's to be only suitable for risk averse people with zero debt, and businesses etc. The average Joe should definately look elsewhere!

[mys1]

Tysons Quick Guide to Maximising losses with only a 50% risk Level!

Go to Casino
- Put 50% on Red on the Roulette table

If you loose
- Walk out of casino with 50% less :(

If you Win
- Walk out of Casino with 50% more! :)

Only idiots try and repeat!

[AGIT8D]

Put 50% on red, put 50% on black, hope it doesn't throw 00's and do pretend balla celebrations?

[mischief1]

Till I got a mortgage, I used to have a term deposit, I would only lock it on for a max 6 months (I'd try for 3-4 months), as I would haggle or look for better rates every time I wanted a renewal, had more than 30k so had a bit more leverage. Some of the online savers are getting pretty good now though, so I guess it depends what the interest rate is at the time. Don't forget any interest you earn is taxable.

I've now put my savings in an offset account, I'll reduce my mortgage time by HEAPS. It's just another account, and I don't get charged to have it. You can't do these with a fixed interest rate, but what you can do is have a percentage of it fixed, and the other variable, so you can at least offset some of the loan if your worried interest rates are going to go up.
I'll save more on added interest than I would earn in interest in a savings account. Hopefully the rate goes down a little bit more, then I'll probably do the fixed/variable thing.

SO, TD is good if you have no debts, otherwise offset IMHO =)

[AGIT8D]

I think rates will drop to spike consumer spending for Xmas, but I wouldn't imagine they'd drop much more after that. I might see how Nov/Dec goes and if it drops, cash in, but regardless, fixed rates are very low at the moment given the banks are forecasting a variable drop. If the RBA drops the rate 0.25% I highly doubt the banks will pass that onto their already low fixed rates. Gambles, gambles, everywhere!

[thrtytwo]

I currently have $10k (min deposit) in a place in subi, called Angas Securities. Its at 8%. The only thing is you only get 3% on compound interest, so I get the interest payed to my normal savings account and get 6% instead.

edit: Link -> Angas Securities (http://www.angassecurities.com.au/aspx/home.aspx)

[racegtst]

I currently have $10k (min deposit) in a place in subi, called Angas Securities. Its at 8%. The only thing is you only get 3% on compound interest, so I get the interest payed to my normal savings account and get 6% instead.

edit: Link -> Angas Securities (http://www.angassecurities.com.au/aspx/home.aspx)

They are unsecured fixed deposits where a TD is secured by the bank and guaranteed by the government.

[thrtytwo]

my bad, either way this company has been around a long time, I trust em enough :P

[Joe]

Current iSaver rate shows 5.65%? (incl 1.00% bonus rate), there are other accounts with higher rates that require less work, given that its being done automatically for your, point is somewhat moot, but still, higher rates to be had elsewhere.

Being with NAB, I can transfer money in and out within seconds, and as a result, we shuffle money in and out on an almost daily basis i.e. keep it in the isaver and only use it when we need to buy something.

If i had to wait 2 days to get the money or to have it appear in the account when I put it in, like I used to have to with ING direct, this wouldn't work.

Money stays in account for longer and drawn out when needed = moar days of interest

[iluv2moan]

Only idiots try and repeat!

cant loose if u got enough cash to play with and keep doubling your bets each time

[cplagz]

Any idea if the same banks will let you double dip on those rates if you close an account and set up a new one or leave for 3 months then bring the money back to rinse and repeat?


Yeah of course they do.. I set a new one up every 3 months and transfer it over.

Our NAB business relationship manager has even offered to do it for us automatically every 3 months!! I just need to swap my personal NAB accounts over to that branch and its a done deal.


Being with NAB, I can transfer money in and out within seconds, and as a result, we shuffle money in and out on an almost daily basis i.e. keep it in the isaver and only use it when we need to buy something.

If i had to wait 2 days to get the money or to have it appear in the account when I put it in, like I used to have to with ING direct, this wouldn't work.

Money stays in account for longer and drawn out when needed = moar days of interest

Same - but now looking at ditching my "daily" account all together (if I can fuck off any DD's I have) and go RaboDirect Online saver (6.51%) plus $0 annual fee credit card with 1:1 frequent flyer points...I never buy anything I can't afford anyway, so might as well let someone carry the debt for 30days and then pay the sum off...at least I will earn a little bit more interest.

[R3N]

Don't you need a linked account for most online saver accounts? I'm with UBank, and linked with my BW daily account (5.00% up to 5k, no monthly fees if you deposit $2k a month)

It doesn't count if you can afford everything pingpingpingping

[cplagz]

Don't you need a linked account for most online saver accounts? I'm with UBank, and linked with my BW daily account (5.00% up to 5k, no monthly fees if you deposit $2k a month)

It doesn't count if you can afford everything pingpingpingping

Some do, some don't. The RaboDirect doesn't require an account with them and its free net banking to any accounts (which is a plus also).

[VRX]

Same - but now looking at ditching my "daily" account all together (if I can fuck off any DD's I have) and go RaboDirect Online saver (6.51%) plus $0 annual fee credit card with 1:1 frequent flyer points...I never buy anything I can't afford anyway, so might as well let someone carry the debt for 30days and then pay the sum off...at least I will earn a little bit more interest.

I did something similar years ago except i had a car loan that was at 11.49% unsecured so i'd get my pay deposited into my loan account,during the 30 days i'd put everything on credit and pay the balance from my loan account on the due date,so all the interest i saved as well as the money i didn't spend in the month ate away at the principal until i payed it off.

[Chrono90]

It's more than a 50% risk level, you forgot the 0 in euro roulette. 00 in American..

[AGIT8D]

Put 50% on red, put 50% on black, hope it doesn't throw 00's and do pretend balla celebrations?

No-one forgot the 00s.