Everyone talks about the hard time borrowers are having now that the banks are cracking down.  But what about savers?  They’ve become the forgotten ones – they are providing the cash that’s fuelling our economy and being rewarded poorly.

Term deposit rates have been declining since 2010 and today they are at the lowest – interest rates vary between 1.62 per cent per annum for a 30-day term deposit to 2.73 per cent for five years.

So what should you do if you are saving to buy a car or your first home?

According to research by financial comparison company Canstar, savers need to work harder and consider putting their money in online saving accounts which offer higher introductory interest rates of up to 3 per cent.

“But once that rate disappears, you have to move to another institution,’’ said Canstar’s Steve Mickenbecker.

In other words, savers need to be as canny as the banks and not pay a penalty for being lazy. Watch that rate and once the best is over, be prepared to move it, move it!

Here are Canstar’s comparison of term deposits versus online savings accounts

Pros of term deposits

* Term deposits remain a popular option because rates are locked in and they give certainty regardless of any interest rate falls.

* Savings are locked away which curtails the temptation to spend

* They are low maintenance

Cons of term deposits

* A minimum deposit is required, usually between $1000 and $2000

* Penalties apply if you have to access your money before the term deposit matures

* No bonus interest during the term of the deposit.

Pros of online savings accounts

* Money is available to you at any time

* Often no minimum deposit is required although some accounts require a small opening deposit.

* mobile banking offer faster and more convenient access to your accounts.

Cons of online savings accounts

* There is uncertainty about how rates will perform in future

* Banks can change the rates at anytime

* Temptation to spend your money

While each option has its own merits, it really boils down to individual needs and circumstances.

“While it is often possible to lock in a higher rate for term deposit than on offer for online savers, the trade-off is that you could miss out on future rate increases and your savings will not be available at call, should an emergency pop-up.

“Term deposits are popular with investors who prefer to receive a set return and this is exactly what you get – you don’t have to worry about fluctuating interest rates like you would with online savings accounts,’’ CanStar says.

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