Term deposit 'veterans' offered rates warning
Aussie consumers may be getting inferior returns if they allow term deposit savings to be rolled over into another account, a commentator has warned.
Finance writer John Collett noted that interest rates on term deposits and online savings accounts have reached their highest levels for at least two years following the Reserve Bank's decision to raise the official cash rate by 0.25 percentage points earlier this month.
However, writing for the Sydney Morning Herald, he urged savers to compare term deposits and consider their options carefully to ensure they get the best deals.
Indeed, Mr Collett referred to the findings of the Australian Securities and Investments Commission earlier this year which suggested that many financial institutions have a ''dual pricing'' policy for their term deposits that pays a higher interest rate to new customers and a lower one to existing term deposit holders who roll their savings over into another term deposit.
"The practice is more prevalent for term deposit terms of less than one year," he added.
"Investors who simply allow the institution to roll them into another term deposit may end up in perpetually lower-paying term deposits than new savers."
It was therefore suggested that customers check alternatives and ask about fees for withdrawing money at the end of the term.
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