Low interest rates are wreaking havoc on depositors’ spare cash with most institutions now offering little more than the rate of inflation on term and savings accounts.

With assistance from financial services research house Mozo, The New Daily went shopping for the best deals in the market.*

Inflation is running at 1.7 per cent, which probably means you need a minimum annual return of two per cent on your deposits just to preserve the purchasing power of your cash.

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The least complicated deals are in the term deposits market, but in many cases the flagship brands of the major banks will barely get you over the two per cent threshold.

Commonwealth Bank, for example, can only rustle up 2.15 per cent for customers prepared to lodge cash in the bank’s vaults for six months.

Our research suggests that consumers are more likely to find market-leading offers among credit unions and the mid-tier banks.

Best three-month fixed deposit

Keeping your wallet full of this stuff takes some canny shopping.

If you need to park your dough for a short period, a three-month term deposit might be your ticket.

In this category Arab Bank is the chart-topper, offering 3.15 per cent on deposits of $10,000 or more.

You can wangle 3.05 per cent from Heritage Bank and FirstMac.

A clutch of institutions offer three per cent on 90-day deposits, including ME Bank, Bank of Sydney and QT Mutual Bank.

However, Bank of Sydney and QT Mutual Bank will not pay interest into an account held at another bank.

Best six-month fixed deposit

Arab Bank also has the best six-month term offer at 3.1 per cent, along with FirstMac.

Bankwest is not far behind with 3.05 per cent for online and over-the-counter 180-day deposits.

Bank of Queensland and Credit Union Australia (CUA) also pay 3.05 per cent.

National Australia Bank and ANZ are the best of the major banks in this category, each offering 2.55 per cent.

HSBC is probably the worst. It pays only 1.85 per cent to lock in your cash for half a year.

Avoid 12-month term deposits

It’s probably a waste of time bothering to lock away your savings for a year because the rates are pitiful.

No institution is paying three per cent for a 12-month fixed deposit, which means you’re better off going with one of the six-month deals mentioned above.

According to Mozo, the best 12-month deal is marketed by Big Sky Credit Union, which pays 2.95 per cent.

UBank is next best with 2.91 per cent followed by ING Direct and Rabo Direct on 2.9 per cent.

Don’t bother with HSBC’s indolent bid of 2.4 per cent in this segment of the market.

Bonus savings accounts

Where will you lock away your money? Photo: Shutterstock

Rates in this product category have taken a hammering since the Reserve Bank began cutting official rates further earlier this year.

In the Bonus Saver segment, it’s not too hard to find accounts that pay close to four per cent but there are usually many strings attached.

ME Bank is paying 3.85 per cent for its online savings account, which includes bonus interest of 1.35 per cent for the first four months if you link to a transaction account.

If your home loan is with RAMS, you might consider a special offer of 3.8 per cent the lender is offering on its savings account. To qualify for the full interest payment you need to deposit $200 a month and make no withdrawals from the account.

Bankwest is another market leader in this category with its Hero Saver account, which offers 3.75 per cent. To get the interest paid at the end of each month you cannot make any withdrawals and need to deposit a minimum of $200 every four weeks.

ING Direct also offers 3.75 per cent on its Savings Maximiser but you will need to have a transaction account with the bank and deposit at least $1000 a month to get the full interest payment.

Rabo Direct pays 3.4 per cent but only on condition that customers agree to give 90 days’ notice before making a withdrawal.

Bank Mecu and Australian Defence Credit Union are marketing competitive offers at 3.4 per cent and 3.35 per cent respectively, with fewer strings attached than other institutions.

* Note: these rates are current at the time of publication and are subject to change.