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Understanding finance company ratings

Ratings are an important tool all investors looking to put money on to deposit need to understand.

The key things to remember about ratings are that:

  • They are an opinion - not a guarantee
  • Each rating organisation is different - understand what they do and how their scales work
  • Ratings are generally giving a probability of default
  • Investment grade doesn't mean an investment is safe. Likewise a so-called “junk bond” isn't necessarily a bad investment.

One of the big issues with these firms is understanding their ratings scales, as they are not particularly intuitive.

Ratings are done by letters and range from A down to E. With each letter there are three steps, eg: AAA, AA, and A. These steps can be further graduated with plus and minus symbols. For instance you can have AA+.

Where they become tricky to understand is that the order of priority is from a triple letter, eg BBB down to a single letter. This, along with the plus and minus symbols can give misleading perceptions.

For instance a BBB- rating is actually better than a BB+.

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Heartland Bank 2.75
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Today's Top 5 Deposit Rates
InstitutionRateProduct
NZCU Auckland 3.25 Success Saver
Heartland Bank 2.75 Heartland Direct Call
Westpac 2.60 Online Bonus Saver - Potential Rate
Westpac 2.55 Online Bonus Saver - bonus rate
Heartland Bank 2.50 Heartland Business Call
Based on a $50,000 deposit    More Rates »
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ANZ 0.10 0.10 0.11
ASB Bank 0.40 0.41 0.42
ASB Bank 0.55 0.59 0.56
ASB Bank 0.60 0.61 0.64
ASB Bank 0.65 0.66 0.69
ASB Bank 0.70 0.72 0.75
BNZ 0.10 0.10 0.10
Heartland Bank 2.25 2.59 2.70
Kiwibank 0.75 0.77 0.88
Kiwibank 1.75 1.81 1.89
Nelson Building Society 3.75 3.90 4.08
RaboDirect 1.00 1.02 1.07
SBS Bank 1.80 1.86 1.94
TSB Bank 1.60 1.64 1.71
Westpac 0.35 0.36 0.38
Westpac 0.10 0.10 0.11
Westpac 2.10 2.16 2.26

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