I just wanted to find out why TymeBank is not on the list as you get 7% interest after 90 days?

Martin, a ratecompare.co.za subscriber

TymeBank does not offer fixed deposits . They do, however, offer really good interest rates on their savings accounts!

Here are the most important differences between TymeBank GoalSaves and a Fixed Deposit.

TymeBankFixed Deposit
1. Do I have to commit my money for a certain fixed period?NoYes
2. Can interest rates change whilst I have my money deposited?YesNo
3. Can I get access to my money at anytime?YesYes
but not without a penalty!

1. Do I have to commit my money for a certain fixed period?

TymeBank acts like a normal savings account. This means you can deposit & withdrawm money into your account whenever you like. When you deposit your money, there is no fixed period (eg 6 months, 12 months, 24 months) commitment needed.

Fixed deposits on the other hand do require a fixed period of commitment. You choose how long you want to give the money to the relevant bank. Anything from 3 months up to 5 years is typical.

But...why should I commit for a certain amount of time? Typically, you earn more. The longer your commitment or fixed period, the more banks are willing to pay you.

2. Can interest rates change whilst I have my money deposited?

Yes, for TymeBank. This is an important point. Interest rate can and likely will change - whilst you have your money deposited at TymeBank.

November 2021. 4% interest from day 1, 5% after 30 days, 6% after 90 days. If you give 10 days' notice after 90 days – you earn as much as 7%

March 2020: 6% interest from day 1, 7% after 30 days and 9% after 90 days. If you give 10 days' notice after 90 days – you earn as much as 10%. (TymeBank press release ↗)

Unlike a Fixed Deposit - where the interest and your investment period is fixed, a savings account like TymeBank is not fixed. The interest rate you earn will likely change whilst you have your money deposited.

PS this is not specific to TymeBank. And note - their rates depsite dropping are still superb! All banks change the interest on your savings or current account. The interest rate is typically closely linked with the overall South African Reserve Bank's interest rate policy. Although we have seen that TymeBank can hold out longer & had kept their interest rates higher despite the Reserve Bank dropping rates in the past.

Fixed deposits on the other hand get fixed amount of interest during your fixed period. If you sign up for a 5-year fixed deposit with Standard Bank at 8.5%, that is the interest you will earn during your 5 years. Even if they start offering better or worse rates in future. You get your 8.5% which you have signed up for.

3. Can I get access to my money at any time?

TymeBank - yes. Since this is just a normal savings account - with great interest rates I might add - you can withdraw your money at any time. Note, that you can earn additional "bonus interest" if you give 10 days' notice. As at November 2021, you earn 7% interest if you give 10 days' notice. It is entirely up to you whether you take them up on that 10 days' notice period offer.

Fixed deposit - yes, BUT you will pay penalties! You want to try and avoid this situation and keep your money until maturity. If you do need to "break a deposit" - ie withdraw your money earlier than your commitment period - you will be paying penalty fees.

Excerpt from Standard Bank's fixed deposit terms and conditions

But just how much of a penalty are we talking about? Here is an example of an early withdrawal penalty fee you will be paying at Nedbank.

Penalty fee: One tenth of the interest rate that applies to the investment (at least 1%) x requested withdrawal amount x unexpired investment term.

Undue-interest fee: Interest rates for investments over longer terms tend to be higher than for investments over shorter terms. If the interest rate We have given You for the full term of Your investment is higher than the interest rate that would have applied for the investment over the shorter term, ie the term that Your funds were actually invested with Us, You will pay an undue-interest fee, which is calculated as follows: Capital amount x undue-interest differential/365 x number of days the money has been invested.

Admin fee: R100 Source: Nedbank Ts and Cs

Total fee = Penalty fee + undue-interest fee + admin fee.

Yikes! Bottom line. If you do commit to a fixed deposit, try not to break it. Like a divorce, it is messy, complex and expensive.

Summary

  • Why do I not include TymeBank on my list at ratecompare.co.za? Because they do not offer fixed deposits.
  • What are the differences between TymeBank and Fixed Deposits?
    1. Fixed period? TymeBank - no need to commit to a fixed investment period. Vs Fixed Deposits - you need to commmit to a fixed investment period
    2. Interest rates change? TymeBank - interest rates may change whilst you have your money deposited at TymeBank . Vs Fixed Deposits - the interest rate is fixed throughout your investment period.
    3. Access? TymeBank - you get access to your money at any time without penalties. You can even get additional interest if you give them 10 days' notice. Vs Fixed Deposits - if you want early access prior to maturity you will pay an early withdrawal fee. These fees are complex and hefty!