Even though interest rates are low and depositors get paid very little, especially if they pay tax, there are some significant advantages in deposit investments:
- Depending on the type of deposit, access to your funds if you need it.
- The Commonwealth Government Financial Claims Scheme (FCS), which aims to protect investors should a financial institution fail.
The FCS provides protection to deposit holders with Australian incorporated banks, building societies and credit unions (known as authorised deposit-taking institutions or ADIs), and general insurance policyholders and claimants, in the unlikely event that one of these financial institutions fails.
The FCS is a government-backed safety net for deposits of up to $250,000 per account holder per ADI. It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria.
Once activated by the Australian Government, the FCS is administered by the Australian Prudential Regulation Authority (APRA).
As a depositor, the scheme helps protect your capital. If you spread your deposits amongst institutions, especially if they are more than $250,000, you can ensure all of your deposit investments are covered by the FCS.
If you have multiple accounts at the one bank, where the bank can identify you as a full or part owner of the funds, it will aggregate those amounts under the scheme.
For more information see the APRA website.