Find and compare high interest Australian term deposits
Product | Max rate | Min. deposit | Company | Interest rate | Next rate increased | Features | Go to site | |
|---|---|---|---|---|---|---|---|---|
2.35% p.a for 60 months | $1,000 |  Personal Term Deposit | 1.90% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.80% p.a for 3 months | $250,000 |  Term Deposit ($250k+) | 1.80% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.70% p.a for 3 months | $1,000 |  Term Deposit | 1.70% p.a for 3 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details | |||
1.65% p.a for 5 months | $1,000 | Green Term Deposit | 1.20% p.a for 2 months | Automatic Maturity Rollover Early Withdrawal Available Is Covered By Government Gurantee Joint Application Available Maturity Alert By Email Maturity Alert By Phone | More details |
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A term deposit is an account into which you deposit your money, and it is then locked up for a certain period of time and at a specified interest rate.
During this time your funds are locked, so you cannot access it. If you do, you will usually incur a penalty fee.
When the term ends, you can choose to reinvest (or ‘roll over’) some or all of the funds, or you can withdraw it all.
The right term deposit, with the highest interest, can help you reach your savings goal faster.
What should I look for in a term deposit?
The first thing to look for is the highest interest rate on your money, by shopping around different banks and financial institutions for the best rate. Interest will usually vary with the length of term you deposit your money for and will often be tiered, according to how much money you want to lock in.
Another thing to consider with interest rates is the interest payment frequency. That is, how often interest is paid to you. This may happen monthly, quarterly, annually or when the term expires.
Although most institutions will charge you a penalty fee for withdrawing some or all of your money before the end of the term, some will allow you to withdraw a portion of your money beforehand without being charged (usually called ‘advanced notice’ term deposits). If you think there’s a possibility that you may need to withdraw some of your money early, think about choosing a term deposit with partial withdrawal allowance.
However, be aware that some banks now have a 31-day rule (meaning you need to give 31 days’ notice before you can withdraw) and this information may not be spelled out to you. Check the PDS, or else you could be in for an unpleasant shock if you need access to your money on short notice. The withdrawal penalty could even be greater than the interest you’re earning. That means that, in the worst case scenario, you could get back less than your original deposit.
Is it possible to increase my earnings in a term deposit?
Although it is true that you don’t have much control of your money once you’ve locked it into a term deposit, one way to get the highest interest rates in Australia is to choose a term deposit that offers compound interest rather than simple interest.
Simple interest means that the interest is simply paid on your initial deposit at the end of the term (for example, if you deposit $10,000 at 5 per cent for a year, then at the end you’d get back $10,500). Compound interest means that interest will be paid into your account regularly during the term and will be added to the principal sum. This means that you earn interest on your interest, which therefore makes you more money.
What interest rate should I look for?
All things being equal, you want your term deposit to have the highest interest rates in Australia.
There are a few variables that go into finding the highest interest rate. As mentioned above, they will vary according to the amount you lock in and the length of the term.
On the one hand, if you invest for a short period (such as one year or less), interest rates may increase, meaning that your money is free to reinvest at a better rate (if there is one – remember, rates can fall too).
On the other hand, if you lock in your money for a longer period to secure a good current rate, and interest rates go up, then you cannot take advantage because your money is tied up. You may be able to withdraw early by paying a penalty fee, but that fee could negate any advantage of the early withdrawal and reinvestment.
One way to address these issues is ‘laddering’ your investments. This means not putting all your money into one term deposit but instead having a number of different term deposits, each with different maturity dates. That way, you’re not locking all your money away if rates rise, leaving some money free for you to take advantage of the highest interest rates in Australia.
Final thoughts on interest rates
When the Reserve Bank of Australia sets the official cash rate at a low level, term deposit interest rates can sometimes be lower than the interest you’d earn with a savings account.
That said, by locking in your rate, you also lock in certainty for the term, so you know exactly what your money is doing for you.
As with any investment, it’s a matter of finding the best solution for your personal needs.
FAQs
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.
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.
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.
While there’s no definite way to predict when term deposit rates will increase, it may help to understand some of the factors that influence term deposit interest rates.
The official cash rate is set by the Reserve Bank of Australia (RBA). When the RBA either increases or cuts interest rates, it influences the interest rates set by banks.
The other factor that determines when term deposit rates will rise is competition between banks. Banks may increase their term deposit rates or offer higher rates as an incentive to win new customers over or increase their market share.
Term deposit interest rates will also change, depending on how much you invest and how long you invest.
When you open a term deposit, you agree to lock your money away for a set period and earn a fixed amount of interest during that period.
Where everyday transaction accounts give you the flexibility to deposit and withdraw funds as frequently as you like, term deposits trade flexibility for higher interest rates.
Once your funds are deposited in a term deposit, they’re fixed for the length of the term, meaning you can’t add additional funds midway through the term.
When the term deposit matures, you may have the option to add additional funds and roll the funds over for another term, or you may choose to withdraw the money at that point.
If you have extra funds to invest, you could consider opening an additional short term deposit account or a high-interest savings account.
It’s worth noting that you can withdraw the funds midway through the term, but a penalty is likely to apply.
Term deposits can be a great way to build your savings, but before you invest, you might have one important question. Are term deposits safe?
When it comes to investing your money, you can choose between high-risk and low-risk options. High-risk options tend to have a better potential payout, but you also risk earning no profit at all or even losing your original investment.
Low-risk options tend to earn less profit than high-risk options, but they’re also safer, with little to no risk of losing money. Term deposits fall into the low-risk category.
Term deposits are safe because they’re low-risk, but they’re also protected by the Australian government’s Financial Claims Scheme. This government guarantee will insure your deposit for up to $250,000 per person, per institution, meaning that even if the bank collapses, the government will reimburse you for your deposit.
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.
One of the main components of a term deposit is your agreement that you won’t access your money until your term has expired. However, life can hand us unexpected expenses, and you might be asking yourself, “Can I break a term deposit?”
In most cases, you are able to withdraw money early from your term deposit, but it will usually come with a penalty. The penalty amount will vary from bank to bank, which is why it’s important to understand your deposit’s early withdrawal policy.
You should also be aware that some financial institutions enforce a waiting period for early withdrawals. This waiting period is typically up to 31 days and commences after you submit a request to withdraw your funds.
Ultimately, whether term deposits will work for you will depend on your particular financial needs.
Term deposits can be a great way to get your money working for you. By locking it away and forgetting about it for a period of time, it can earn interest for you. If you have the interest paid on a regular basis, rather than at maturity, you can either have some extra spending money or you can reinvest it into the term deposit to compound.
Of course, locking your money in a term deposit means you cannot access it for the length of the term, without paying a penalty for early withdrawal. This can remove the temptation to spend the money, while it also earns interest.