Find the highest rate long term deposits online

Compare and calculate interest rates, returns, fees and more. - Data last updated on 21 Oct 2018

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What is a long term deposit?

A long term deposit is usually a term deposit that is longer than 12 months. Your lender will invest your money for a longer fixed term at a fixed interest rate. 

Generally, the longer the term deposit, the better term deposit interest rate you’ll receive from the lender. Long term deposits are a low-risk investment option, as you can deposit your sum of money and forget about it while you build up interest. 

How does a long term deposit work?

A term deposit is an amount of money set aside with a lender for a fixed amount of time. The lender returns your money, plus an agreed amount of interest, on the completion of the term deposit.

Case study

Sarah makes a long term deposit of $10,000 with a lender. It’s for a term of 24 months with an agreed term deposit interest rate of 3 per cent. 

At the end of that 24-month term, the lender returns Sarah’s $10,000 deposit plus the $600 earned in term deposit interest. 

How do I apply for a long term deposit?

  1. Use comparison tools
    Tools, such as RateCity.com.au’s comparison tables and calculators, allow investors to search and compare the most competitive term deposit account for their financial needs.
  2. Choose your term deposit
    Financial institutions will traditionally allow you to apply for a term deposit online, in person at a branch or via phone. If you think you’ve found the most competitive long term deposit account, you can speak to the lender directly for more information before you apply online.
  1. Verify your identity
    Like with most financial products, the long term deposit provider will need to verify you are the person you say you are through proof of identity checks (submitting your driver’s licence, passport, birth certificate etc.).
  1. Make a deposit
    Once everything has been approved, you’ll now need to deposit the lump sum you want to lock away and accrue interest over a fixed long term period. 

What is the difference between long and short term deposits?

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Type of term deposit

Explanation

Why choose this type of term deposit?

Short term deposit

A deposit that’s locked in for less than 12 months. Usually the minimum is one month.

1.     You benefit by being able to reach your money sooner.

2.     Gives you the opportunity to shop around for a better rate once the term is up, instead of being stuck with one rate for several years.

Long term deposit

A deposit that’s locked in for more than 12 months.

1.     Bigger interest reward for letting lenders mind your money for a longer period of time.

2.     A low risk investment option, as you can pass on your sum of money and forget about it while you build up interest.


What do I do when my long term deposit matures?

It’s crucial that you call your provider immediately when your long term deposit matures, otherwise the long term deposit account may automatically roll over into a new one, and you could be hit with a fee to try and get out it. 

According to ASIC’s MoneySmart

You must remember that term deposits are not 'set and forget' investments. 

“When your investment is maturing, your bank or credit union will write and tell you how much interest you've earned and explain what your options are. If you do nothing, your term deposit may automatically roll over into a new one. This may have a lower interest rate than the original or other similar products”. 

What is the best term deposit in Australia?

While there is no one ‘best’ term deposit, the simplest way to choose a long term deposit that best suits you is to match it to your financial goals. 

  1. If you want to make money in the short term (perhaps for an overseas trip or to pay for house renovations), then a short term deposit will probably work better for you. Short term deposits can also be a good choice if you’re a first-time investor and feel nervous committing to anything long-term. 
  1. If you have longer-term financial goals, have more cash or assets at your disposal, and are comfortable locking away a sum of money for a longer time, then a long term deposit is probably better suited to you. 

What are the pros and cons of long term deposits?

Pros of a long term deposit:

  • Term deposits can rival the interest earned on savings accounts
  • Lock in one fixed term deposit interest rate for the length of the term
  • Lock your funds away for up to 10 years
  • Less volatile and therefore lower risk
  • The longer the term, the higher the interest rate you’re likely to receive
  • Unlike high-interest savings accounts, there’s no minimum deposit requirement 

Cons of a long term deposit:

  • If your financial circumstances change, and you need to access your funds before the end of the agreed term, you’ll likely be penalised
  • Long term deposits require forward thinking to ensure the term deposit suits your long-term financial needs
  • ‘Setting and forgetting’ your loan could see it roll into a new one, and you may be fined trying to close the new term deposit
Pros
  • Term deposit interest rivals savings accounts interest
  • Lock funds away
  • Lower risk investment
  • Longer the term = higher the interst rate
  • No minimum deposit
Cons
  • Early exit fees
  • Must suit your future needs, which no one can predict
  • Can't 'set and forget' term deposit or you could face fees
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FAQs

Just like your regular income, the interest you earn on term deposits is taxable. You might be wondering, “How do I pay tax on term deposits?” The tax you pay on your interest will depend on the length of your term and when your interest is paid.

You should pay tax on any interest that you have received within the current financial year. For example, if you receive monthly interest payments, these payments should be claimed on your tax return. However, if your term deposit is longer than one year and you will only receive interest at maturity, then you will pay tax on your interest in the year that you receive it.

Paying tax on your interest is much like paying tax on your income. The money you have made in interest should be claimed on your tax return along with any other income in that year.

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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