High interest accounts: Term deposits or cash accounts?
Banks offer two excellent means of guaranteeing reasonable returns on medium to large investments, term deposits and high interest cash accounts. There are advantages to each of these, but it can sometimes be difficult to ascertain which is the right one for your investments. This often comes down to the amount of money you can spare, but this isn't always the case.
Term Deposits
Term deposits can be an excellent option if you can do without a considerable amount of money for a somewhat lengthy period of time. It can be possible to end your investment early, but you will be charged an exceptionally high fee for doing so. The idea behind it is that the banks have a fairly good guarantee of your money remaining with them for quite some time, and can thus use it more liberally as an investment asset. Thus you are entitled to greater returns than with a more accessible account in which the level of your deposit remaining stable is less sure.
Cash Accounts
High interest cash accounts do not provide anywhere near the level of returns that term deposits do, but you depending on the account, you can have access your money quite liberally while maintaining a high rate of interest. Certain banks only offer interest returns in these accounts if you do not access your funds for a month, but other calculate interest daily and pay it monthly, allowing you to access your money whenever you need it. Some accounts only give high interest rates for large deposits, as it is usually unlikely you will spend an extremely large amount within a short period of time, so this offers a low level of security to the banks.
Generally, the more restrictions placed on whether you can earn interest on your funds, the higher the rate you can benefit from, but as term deposits will provide better returns for no access, you may as well find an account that gives a reasonable rate at any level of investment. Having full access to your funds with some benefits is often better than very limited access to your funds when no access would earn you so much more.
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