Term deposits have arguably been the most hotly-contested area in personal finance, with each week bringing a new top-dog vying for deposit dollars.
This week, Macquarie Bank edged out the likes of AMP and Judo to re-take the crown in the one-year term deposit space.
Its top one-year rate is now 3.80% p.a. with interest paid at maturity and a $5,000 minimum deposit.
While this represents an increase of just 5 basis points, the tit-for-tat race means one-year rates are edging ever-closer to the 4.00% p.a. mark.
Only a few months ago, a 4.00% p.a. rate was considered 'good' in the five-year space, let alone the one-year space.
Savings account rates continue to trend upwards as well, with Bank of Queensland's 4.00% p.a. announcement last week proving popular.
Top term deposit rates
| Term | Bank | Interest Rate | Min Deposit |
| 6 Months | Judo | 3.00% p.a. | $1,000 |
| 1 Year | Macquarie | 3.80% p.a. | $5,000 |
| 2 Years | Judo | 4.10% p.a. | $1,000 |
| 3 Years | Judo | 4.25% p.a. | $1,000 |
| 4 Years | Judo | 4.40% p.a. | $1,000 |
| 5 Years | Judo | 4.50% p.a. | $1,000 |
Top savings account rates
| Type | Bank | Interest Rate | Notes |
| Unconditional | ANZ Plus | 3.00% p.a. | Max deposit $250,000 |
| Conditional | Bank of Queensland | 4.00% p.a. | Ages 14-35, deposit $1,000 per month and make 5 debit card transactions in linked everyday account, max deposit $50,000 |
| Honeymoon/Intro | Macquarie | 3.70% p.a. | 4 month intro rate then reverts to 2.75% p.a., max deposit $250,000 |
To compound or not to compound?
An important consideration is that term deposits have simple interest, not compounding; compounding basically means your interest earns interest.
For example, if you had an unconditional 3.80% p.a. savings account rate with interest paid and compounded monthly, and paid nothing extra into it, you would earn $387 in interest in the year with a $10,000 balance.
Compare that to an equivalent one-year term deposit rate with interest paid at maturity, and you'd earn $380.
While a difference of only $7 - enough for a Big Mac - the results get more pronounced if you have a bigger deposit, save more, and save for longer.
Of course, with a term deposit the interest rate is locked-in, meaning it won't change like with a savings account rate.
That peace of mind might be worth $7 to you.
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