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Which fixed deposit account offers the best interest rate?

Which fixed deposit account offers the best interest rate?

With interest rates at their highest since 2009, it’s a great time to save money in a fixed deposit account. We take a look at the banks’ offerings.

The 10th consecutive interest-rate hike last month has millions of consumers stressing about increased debt repayments. However, if you are able to set funds aside, there has never been a better time to save.

A fixed deposit account, which means your money is not accessible for a fixed period, is a great way to get started. You can get different terms, from three months to six months or even five years.

Thami Cele, head of savings and investments at Absa Everyday Banking, says key considerations when selecting a fixed deposit account include the lump sum investment amount, the term of investment, the accessibility of the account in an emergency, the competitiveness of the interest rate, penalty fees for early withdrawal and management and transaction fees.

“You should also note the interest accrual and payout schedule,” he says.

Thopi Mhloli, product owner for savings and investments at Standard Bank, says fixed deposit accounts are ideal for customers such as retirees who want a guaranteed return and don’t want to run the risk of losing their original investment amount.

“The other important characteristic of fixed deposit accounts is that, although they do not allow for additional deposits during the investment term,  they do allow for interest earned to be paid out on a monthly, quarterly or annual basis,” she adds.

Standard Bank reports that guaranteed capital savings products and fixed deposit accounts continue to grow in popularity.  

“The top popular terms for us are the 60 months, 12 months and 36 months savings terms. The product is also popular among seniors, and we offer preferential rates to these customers on specific balance bands,” Mhloli says.

Himal Parbhoo, chief executive of FNB Cash Investments, says fixed deposit accounts can also be used for goals such as wedding expenses, car and home deposits,  bucket-list travel and home renovations.

“Investments in fixed deposits have doubled in recent years,” he says.

“Reasons include the Covid-19 pandemic and customers looking to benefit from the high interest-rate environment. Our digital offering made it favourable for customers to open fixed deposits online without visiting the branch, because this was not possible during the Covid period.

“This created online usage behaviour which has resulted in continued take-up of fixed deposit products.”  

The prime lending rate of 11.75% is at its highest since 2009, and the continued interest-rate hikes are an effort by the Reserve Bank to curb inflation.

Although inflation ticked down to 6.8% in April, it is still not as low as the central bank would like.

Patrick Buthelezi, economist at Sanlam Investments, says the possibility of future interest-rate hikes should not be ruled out and will depend on the inflation outlook and the strength of the rand.  

saving interest table

We took a look at the interest rates the banks are offering you on fixed deposit accounts as of 9 June for over-55s who have a minimum investment of R100,000, using effective annual rates.

In the case of TymeBank, the rates are available to all customers, regardless of age or deposit amounts. Nedbank offers seniors higher rates on the Nedbank Electronic Optimum Plus account, which is the one we used in our table. DM

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Comments - Please in order to comment.

  • David C says:

    Hi DM – some of the info in your table is incorrect. For example, on a R100,000 deposit, the 36 month Absa Senior effective rate is only 10.47%, and for 12 months it’s only 9.71%.

    • Neesa Moodley says:

      Thanks David C. As mentioned in the article, these rates were provided by the bank. We went back to Absa and here is their response:

      Thank you for your feedback. The rates are correct and reflect the possible interest rate a senior customer can receive when investing funds from R100,000 and above in an Absa Dynamic Fixed Deposit Account with 0% immediate access. The rates provided for the purposes of the article was for the flagship product “Absa Dynamic Fixed Deposit” and not the generic Absa Fixed Deposit.

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