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Evaluating term deposits rates

Term deposits rates are special rates that are extended by financial institutions in exchange for depositors leaving the balance of the term accounts in place for a specified period of time. The term or duration of that time frame will vary, with many institutions offering special rates when the funds are left in place for a year, two years, or five years.

When it comes to evaluating and comparing terms deposits rates offered by different institutions, it is important to look at both the provisions of the account contract, and consider how easily you can comply with those terms. Typically, terms deposits rates extended on accounts are higher when the balance of that account can remain in place for a longer period of time.  This means if you can commit to depositing a required amount into the account and allowing it to remain untouched for two years rather than one, the rates extended for the account will be higher.

If you have money to spare and can reasonably expect to not need those funds for two years, going with the longer term is a very wise move.Keep in mind there are often strict penalties for early withdrawal on term accounts, even when the institution recognises a hardship situation for the depositor.  For this reason, don't commit to a longer term without careful consideration of how you could manage to get by without touching the account balance, even if a dire emergency arose.

In addition, look for institutions who offer accounts that offer relatively less stringent penalties for early withdrawal related to specific types of emergencies, such as a job loss.  This will often allow you to enjoy a competitive return with your term deposits rates while also minimising the losses if a real need does arise.

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