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As readers of YieldReport will know, many of Australia’s banks have started to promote their cash accounts rather than their term deposits because, from the bank’s point of view, cash accounts are considered to be more ‘sticky’ kinds of deposits as far as Basel III capital adequacy goes.
One of the main differences between cash accounts and term deposits is that cash accounts lock up an investor’s money for 31 days with no chance of withdrawal. These accounts often come with special terms and conditions too such as minimum and maximum balances, the requirement that at least one deposit of a certain size is made each month and the requirement that each end of month balance is higher than that of the preceding month.
The upside is that investors can earn bonus interest when they grow their balance by a certain amount, often $200, before the end of the calendar month and make no more than one withdrawal in that month.
Often these accounts will have a maximum balance on which bonus interest can be earned, such as $100,000, but often investors will be allowed to open and operate two cash accounts at the same time.
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