Could a short term deposit be the cure to comfort spending in winter?

Dog wrapped in blanket.
Photo by Matthew Henry on Unsplash.

Comfort spending is all too tempting during the cold winter months, especially when you’re stuck at home during a lockdown. You may not be allowed to go outside, but you can still access the internet right? Before you know it harmless browsing turns into five things in your cart and a big dent in your savings stash. If only there were somewhere to keep your rainy day fund out of reach.

Well we think the humble term deposit could be one way to do just that! Term deposits have been around for a while, but in 2021 these relatively low risk investment options might just have renewed appeal. 

Comfort spending in 2021

In Mozo’s 2021 Comfort Spending Report, we found that one in three Australians had increased comfort spending since the beginning of the pandemic.

Around 87% of those surveyed admitted to comfort spending with 38% saying they did so out of boredom. The problem is impromptu buys can add up. Mozo calculated that the average Australian could be dropping around $2,172 on comfort purchases each year. That’s approximately $181 per month

If this sounds all too familiar to you and you find it hard to resist the temptation to shop online while at home, a term deposit might be worth considering. Terms are available for as short a time as one month so you don’t have to lock your money away for an age.

Short term deposits for your money

In Australia there is certainly no shortage of shorter term deposits. In fact, Mozo tracks term deposits from around 70 different providers! A large number of these offer terms as short as one month, two months, three months, four months and six months.

Besides being a way to remove the temptation to spend your savings, term deposits also come with interest. This means that while your money is out of reach, you also accrue a little sum of cash. Some providers Mozo tracks with competitive interest rates for shorter terms are Judo Bank, Citi and BankVic. All of these offer interest rates well above the average for all three month term deposits listed in the Mozo database, which is currently 0.33% p.a.*

Judo Bank Term Deposit
  • 0.82% p.a. for a 3-month term deposit
  • Deposit between $1,000 and $1 million
  • Government deposit guarantee up to $250,000

Ever since it burst onto the scene in 2019, Judo Bank has consistently offered some of the most competitive term deposit rates available in the Mozo database. Of all the three month term deposits Mozo tracks, it has the highest rate at 0.82% p.a. for interest paid at maturity. The amount you can deposit ranges from as little as $1,000 to as much as $1 million. Just keep in mind that if you wish to withdraw funds early you will have to give 31 days notice and in this instance a break fee may apply.

Citi Term Deposit
  • 0.75% p.a. for a 3-month term deposit
  • Deposit between $10,000 and $249,999
Find out more

With the Citi three month term deposit, deposits can be made from $10,000 to $249,999. Interest is paid at maturity and the rate is currently 0.75% p.a. Again just keep in mind that you will have to give 31 days notice to withdraw funds early. In this instance, Citi will also charge you a break fee. This will be 20% of the total interest earned on your term deposit up until the day the withdrawal request is processed.

BankVic Term Deposit
  • 0.70% p.a. for a 3-month term deposit
  • Deposit between $5,000 and $100,000
  • B Corp certified mutual bank
Find out more

BankVic is a B Corp certified mutual bank with a strong focus on community, the environment and sustainability so if you’re concerned about how your money is invested this could be a good option for you. It offers a rate of 0.70% p.a. for a three month term. Interest is paid at maturity and deposits can be made from $5,000 to $100,000. BankVic says customers may break a term deposit before maturity, depending on individual circumstances. Although it is likely that this will come with a fee attached.

Term deposits and early withdrawals

When putting your money in a term deposit, it is important to make sure that you can afford to not touch it for that length of time. Early withdrawal is not ideal, as it does come at a cost.

Of course, emergencies do happen and there is always a chance that you will have to access your money before the term matures. 

With this mind, even if you are certain that you won’t have to access your money for the length of the term, it is still a good idea to acquaint yourself with all the terms and conditions. This means knowing what early withdrawal fees apply and how much notice you may have to give to access your money before the term ends.

Confident that a term deposit will work for you? If none of the terms above strike your fancy, head over to Mozo’s compare term deposits page to review more options. Here you can filter by one, three, six and 12 month and one and two year terms. Your money could be out of sight and out of mind in no time!

*Average interest rate calculated using information available in the Mozo database, correct as of 6 July 2021.

* Different interest rates apply to different amounts or different interest payment frequencies.

^See information about the Mozo Experts Choice Term Deposit Awards

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