Term deposits give you a higher interest rate in return for locking down your money, but just how tied down are you prepared to be? A new government proposal could see the introduction of term deposits which require 31 days notice to remove your money.
Picture by Michael Styne
Typically, a term deposit won't pay you the promised interest if you have to withdraw before the term, but you can usually do so if you urgently need the funds. A proposal is being considered by the Australian Securities and Investments Commission (ASIC) would allow banks to offer term deposits which could only be broken with 31 days notice. That could potentially lead to higher interest rates being paid, though that isn't the reason behind the move. (Global Basel III banking standards suggest banks should offer longer-term deposit periods to ensure they have a predictable pool of funding.)
Would you sign up for a term deposit knowing your money was trapped for at least a month? Prefer a different investment strategy? Tell us your thoughts in the comments.