Today's top term deposits products
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Australia's best term deposits for May 2020
Getting the most out of your savings can be a challenge when term deposit interest rates are currently sitting at historic lows. However, in this growing period of uncertainty, one thing term deposits may offer your savings is (almost) guaranteed returns.
So you’ve managed to save up a lump sum of money, and you want to watch it grow with a competitive interest rate. Perhaps you’re worried that you’ll be tempted to dip into your savings for non-essentials?
A term deposit could be a great option to help you grow your savings and stop you from spending them.
Here are a few ways to compare term deposits and make sure you find the right one for you.
What is a term deposit?
A term deposit is an investment product that fixes your interest rate for a set period time, usually between six months and five years. You will be paid a fixed interest rate on your account balance, and will not have access to your money during this period of time, unless you break the term deposit and pay a penalty fee.
When comparing term deposits, remember that interest can be paid monthly, annually or at the end of the term. Some term deposits may even pay interest quarterly. Generally speaking, the more frequently interest is paid, the better, as this means that you are ‘earning interest on the interest’ already in your account.
Can I break a term deposit?
Yes and no. If you wish to withdraw money from your term deposit before the end of the term, you can usually do so by paying a break fee. You will need to read the fine print on your term deposit agreement to find out how much this is. Make sure to take this into account before signing up to a term deposit, so that you know what sort of penalty you’ll be looking at if you need access to your money quickly.
However, many banks have also now introduced ‘unbreakable’ term deposits – although these term deposits are not actually unbreakable. But they do require 31 days’ notice before any funds can be withdrawn.
This is something you might want to investigate while comparing term deposits. Also, make sure to check the conditions of your term deposit before signing up. The banks will generally not advertise unbreakable term deposits or break fees, so make sure you are not caught off-guard and then not able to access your money when you need to.
Why not just use a savings account?
In general terms, term deposits have historically had better interest rates available than savings accounts. However, make sure to compare a few savings accounts and term deposits if you are tossing up between the two. Interest rates are always changing, and you may find the rates available for savings accounts are comparable, or even better, than for term deposits.
Savings accounts do also allow you access to your money at any time, which can be a blessing or a curse, depending on your circumstances. If you are concerned that you could be tempted to spend some of your savings, a term deposit is a great option to lock away your money for a predetermined period of time, safely of course. This can be beneficial if you have recently reached a savings goal, and want to make sure your money stays where it is while also earning interest.
What should I look for when comparing term deposits?
When comparing term deposits, start by deciding in no uncertain terms what you can and cannot commit to. Make sure you know how much money you can afford to invest, and for how long. This may mean creating a separate emergency fund, and leaving a portion of your savings in it so that you never need to break the term.
Knowing how much and for how long you will be investing will reduce the number of term deposits you need to compare, as many have minimum and maximum terms and deposit amounts. From there, the next, and probably most important item to consider is the interest rate.
Like with savings accounts, when you are comparing term deposits, the general rule of thumb is the higher the better. Make sure to also check and compare the standard and special interest rates. Many term deposits will offer an increased rate of interest for the first three months or so, as an incentive to sign up new customers. Make sure that you choose a term deposit with an interest rate that will deliver value for the entire term, not just part of it.
Is a term deposit right for me?
A term deposit could be a great option for you if you have a lump sum of savings, and wish to invest it safely for a set period of time. Term deposits are also helpful for those of us who struggle not to dip into our savings, by removing the option altogether.
On the other hand, if you prefer or need to have instant access to your money, or want to continue to grow your savings, a term deposit may be too restrictive, or not deliver enough value.
Before you start comparing term deposits, make sure to weigh up your personal circumstances and preferences so you know what you can and can’t commit to.
A property and personal finance writer, Nick Bendel covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.
Today's top term deposits products
Find popular term deposits lenders from a wide range of Australian. View All >
If you’re ready to add a term deposit to your financial strategy, there’s likely one question on your mind: what is the best term deposit rate in Australia?
Unfortunately, there’s no one right answer to this question.
That’s because if you want to find the best term deposit rate in Australia, you first need to understand the nature of interest rates themselves. The financial market is always moving, with interest rates moving up and down and special offers being introduced and withdrawn.
As a result, whatever the best term deposit rate in Australia is today might not be tomorrow.
So to find the best term deposit rate in Australia, it’s best to ignore the past and to instead focus on today’s market. Compare term deposits to find out the current rates and find the right term deposit for you.
The best interest rate for a fixed term deposit changes all the time, as interest rates move up and down and banks compete with each other to win market share.
To find the best interest rate for a fixed term deposit, it’s helpful to understand how interest rates are applied to term deposits.
There are three factors that determine the fixed interest of term deposits:
- The size of your deposit
- The duration of the term
- The frequency of interest paid
Term deposits vary in duration from one month to five years or more. Interest rates generally work on a sliding scale; shorter terms get a lower rate, longer terms get a higher rate.
Here are a couple of examples of how interest is applied to term deposits.
- A $10,000 term deposit taken out over 12 months, with interest paid at maturity, might receive a fixed interest rate of 2.20 per cent.
- A $10,000 fixed term deposit taken out over 12 months, with interest paid quarterly, might receive a fixed interest rate of 2.00 per cent.
Using the size of your deposit, the duration of the term and how often you want to be paid interest, you can shop around for the best interest rate for a fixed term deposit.
If you’ve been shopping around for a term deposit, you might be wondering which bank has the best term deposit rates.
Term deposit rates will generally be affected by the amount you choose to deposit and whether you opt for a short or long term deposit.
Longer term deposits tend to have higher interest rates than shorter terms. The trade-off for earning a higher interest rate on your term deposit is that you can’t access your funds for the duration of the term deposit.
When comparing which bank has the best term deposit rates, it pays to do your research and compare how your funds will fare over the short and long term.
Unlike home loans or savings accounts which give you the option of fixed or variable rates, term deposits are always fixed, which means you get a guaranteed amount of interest over the term of the deposit.
If you are a student who has managed to save some money and are looking for a safe investment option, you may be considering a term deposit. Most term deposits (and other bank accounts) are open to anyone who is at least 18 years old.
There are also some term deposits open to younger students, some even without an age limit. These term deposits are usually opened on the student’s behalf, by their parent or guardian.
A term deposit is generally a safe investment option, especially if you want to make sure you can’t touch your savings for a set period of time. If you are 18 or older, shop around for a competitive interest rate before committing. If you are under 18, speak to your parent or guardian to get started.
You may have heard that a term deposit is a type of investment, different to a traditional savings account. All investment comes with inherent risk, so it’s important to know how safe a term deposit is before committing.
Term deposits offer a fixed interest rate which is guaranteed, so you do not have to worry about rising or falling interest rates when investing. You can add up how much interest you will earn over your fixed term, and this will be paid into your account per the conditions of your term deposit.
Term deposits with authorised deposit-taking institutions are also guaranteed for up to $250,000 by the Financial Claims Scheme, so you don’t have to worry about the bank collapsing either.
The only inherent risk of a term deposit is if you may need to break it early. If this happens, you will need to pay a breakage fee and possibly sacrifice some of your interest as a penalty. But if you know you can invest a certain amount of money for a fixed period of time, you can rest assured that a term deposit is a safe investment option.
Yes, term deposits are covered by the Australian government guarantee.
Under the Financial Claims Scheme, the Australian government guarantees term deposits up to $250,000, capped at one person, per financial institution.
This means that your term deposit (if it’s $250,000 or less) is protected in the unlikely event the bank, building society or credit union collapses.
If you have more than $250,000 in a term deposit with one the one bank, for example, then only up to $250,000 of your principal is covered.
If you’ve got more than $250,000 and you wish to invest in a term deposit, you could consider dividing your money between term deposits and banks (limiting each deposit to $250,000 per bank).
That way all of your deposits are protected by the Australian government guarantee and you will not suffer any financial losses.
Term deposits are flexible, low-risk, and earn you interest over time. But before you apply to open a term deposit, you might be wondering: how do term deposits work?
A term deposit is an agreement you make with a financial institution. This agreement will specify a certain amount of money that you will give the bank for a certain amount of time. In return, you’ll earn a fixed amount of interest on your deposit throughout your term.
Term deposits work as an exchange between a financial institution and an individual. You can think of your term deposit as a loan to the bank. Because you’ve loaned the bank your money, they’re willing to pay you interest on your deposit.
A fixed term deposit is a safe and stable way to earn a fixed return on your cash investment.
Fixed term deposits are essentially bank accounts where you lock your money away for a fixed period and earn a fixed interest rate on those funds.
Fixed term deposits can be both short term, which is usually anything under 12 months, or long term, which can be up to 10 years.
Once the fixed term has ended, the bank or financial institution will give you back your initial deposit plus any interest you earn during the fixed term period.
Depending on the type of fixed term deposit account you open, when the term matures, you may have the option of rolling the funds over for a new term or withdrawing the funds.
Unlike other savings or transaction accounts which offer variable interest rates and flexible features, fixed term deposits offer fixed interest rates, which means the amount of interest you earn will remain the same during the term of the deposit.
The term deposit rate is the agreed interest rate for your term deposit. It remains fixed for the term of the deposit.
For example, if you deposit $5,000 for 12 months at a 2.5 per cent term deposit rate, that 2.5 per cent term deposit rate will be fixed for the entire 12 months and won’t change until the term matures.
The term deposit rate is one of the most important factors to consider when comparing your term deposit options. The general rule of thumb is that the longer the term, the higher the term deposit rate.
Term deposits are a popular type of investment because they’re safe and provide reliable returns.
The return you get on your term deposit will be determined by the amount you initially invest, the amount of time you choose to invest it for, and the term deposit rate.