7 Common Term Deposit Mistakes and How to Avoid Them
Mistake 1: Accepting Your Bank's First Offer
The Problem: Most people deposit with their existing bank without comparing rates.
The Solution: Compare rates across at least 5-10 institutions. The difference can be 1-2% P.A., worth thousands on larger deposits.
Mistake 2: Ignoring Smaller Institutions
The Problem: Assuming only big banks are safe, missing better rates elsewhere.
The Solution: All APRA-authorised institutions have identical government protection. Credit unions and smaller banks often offer superior rates.
Mistake 3: Wrong Term Length
The Problem: Choosing terms without considering rate environment or your needs.
The Solution: At rate peaks (like now), lock in longer terms. At troughs, stay short. Match terms to when you'll need the money.
Mistake 4: Automatic Rollover Trap
The Problem: Letting deposits auto-renew at potentially lower rates.
The Solution: Set calendar reminders before maturity. Review rates and actively choose the best option.
Mistake 5: Not Providing TFN
The Problem: Without your Tax File Number, 47% withholding tax applies.
The Solution: Always provide your TFN when opening accounts. This is standard practice and protects your returns.
Mistake 6: All Eggs in One Basket
The Problem: Exceeding the $250,000 guarantee limit at one institution.
The Solution: Spread larger deposits across multiple APRA-authorised institutions for full protection.
Mistake 7: Not Verifying APRA Authorisation
The Problem: Depositing with unregulated entities attracted by high rates.
The Solution: Always verify APRA authorisation at apra.gov.au before depositing. If it's not listed, your money isn't government-protected.
The Cost of These Mistakes
On a $100,000 deposit:
- Wrong rate (1.5% difference): $1,500/year lost
- No TFN provided: Up to $3,500/year withheld
- Unprotected institution: Potential total loss
Simple Steps to Success
- Compare rates widely before depositing
- Verify APRA authorisation
- Provide your TFN
- Choose appropriate term lengths
- Set maturity reminders
- Spread large deposits across institutions
Avoiding these common mistakes can add thousands to your returns over time.