Term deposits: Kiwibank offers outstandingvalue

$4 per request for a detailed transaction history (available from a Kiwibank banking representative) Postal statement fee $2 per account on the following accounts: Now Account Pay as you go, Now. Kiwibank 5 Year Term Deposit Rate. Type Fixed: Rate 2.75%: Currency: NZD: Rate indicated is requires a minimum deposit of $50,000. The rate of 2.75% is 0.8% lower.

CANSTAR releases its2015 Term Deposit Award report today, researching and ratingnine banks to determine which offer outstanding value forconsumers through their suite of term deposits.

Ratechasing seems to have become a national sport among thoseintent on channelling the most interest possible into theirterm deposits. While it is obvious that pursuing the highestinterest rates on the market will bump up your bottom line,just how much better off will you really be in the longrun?

To work out exactly how much ahead a rate chaserwould be, compared to a customer who simply rolled a termdeposit over at the same bank, CANSTAR pitted the twostrategies, using $10,000, to see what wouldhappen.

CANSTAR looked at two hypotheticalscenarios:

• One customer chasing the best rate andmoving $10,000 every 90 days for the past three years –but with a two day gap in terms each time,and
•
• One customer staying put at the oneinstitution.

Firstly – ratechasing…

The rate chaser did come out aheadover the past three year period – but only just. Activelychasing the highest term deposit rate every 90 days forthree years, with a two-day down time between each term,netted our hypothetical saver a total of $1,172 interest,giving a total balance at the end of three years of$11,172.

Being loyal…

In comparison,the loyal customer had cash in hand at the end of the 3-yearterm of $11,139. In other words, $11 per year less ininterest on a $10,000 deposit. Does it make it worth theeffort of switching?

“The extra interest that you couldpotentially earn by rate chasing will depend on the amountyou’re investing, of course,” said CANSTAR GeneralManager–New Zealand, Derek Bonnar. “An extrathirty-three dollars over three years, for me, wouldn’t bea compelling reason to switch. It might be for othersthough.”

CANSTAR’s research into term deposits isnot just a case of comparing rates. There’s no doubt ratesare the key driver behind the attraction of term deposits toinvestors or those saving for a goal. However there areother factors which CANSTAR takes into consideration withits research that heighten the consumer’s experience witha particular institution’s term deposit process.

“Aswell as interest rate it’s important to consider factorssuch as whether or not there’s a need to open a separateaccount with that institution, as well as the way the termdeposit maturity is handled and notice conveyed to thecustomer,” said Mr Bonnar. “Then there are the interestoptions, plus the ease of rollover facilities or processesfor monies moving into or out of the bank.”

CANSTAR hasassessed the interest rates and account features of termdeposits across nine financial institutions to determinewhich institution offers outstanding value in the termdeposit market. This year, once again, we couldn’t go pastKiwibank.

“As far as interest rates go, Kiwibank is Kingwith the top rate of 4.42% for both $10,000 and $50,000 overthe five to seven month brackets that we assessed,” saidMr Bonnar. “In fact, the bank pays out in excess of twelvebasis points above the industry average in thesetimeframes.”

Alongside the pricing score, CANSTAR saidthat Kiwibank earned the highest feature score.

“Thereare a lot of things to like about their term deposits. Forinstance, up to twenty percent of the principle can bewithdrawn at any time during the term with no penalty,” MrBonnar noted.

Other features of appeal, according toCANSTAR, are a full online application process for new andexisting customers, with a 7-day variation period. Switchingover your money at maturity time to another bank is noproblem and can be done free online.

Nz Term Deposit Rates

“Kiwibank has nowwon CANSTAR’s Term Deposit Award three out of the fourtimes it has been presented. We congratulate them on thisachievement,” Mr Bonnar said.

Consumers can download the full range of termdeposits researched by CANSTAR at www.canstar.co.nz

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