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Term deposits

How to find the best term deposit for you

Page reading time: 2 minutes

Term deposits let you invest for a set amount of time and get a fixed interest rate. They can be useful when saving for bigger items like a car, or investing when you want to be certain about the interest you'll earn.

If you want to save but might need quick access to your money, a savings account could be better.

Why use a term deposit

Term deposits are a low-risk way to invest your money and earn a fixed rate of interest.

They lock away your money for the time that you choose (the term), usually between one month and five years. If you need your money before the term ends, you have to pay a penalty fee. You need a minimum amount to open a term deposit, for example, $5,000.

Higher interest rate

The higher the interest rate, the faster your money will grow.

Term deposits offer a higher interest rate than most transaction and saving accounts. Generally, the more money you put in, or the longer you invest, the higher the interest rate.

Government deposit guarantee

Terms deposits are a low-risk investment. They are protected by the Australian Government's financial claims scheme. This guarantees to pay you up to $250,000 for deposits in the unlikely event your bank, credit union or building society fails. This guarantee applies per person and per institution.

No set-up fees

Most term deposits have no set-up or account fees. But if you need your money before the term ends, you generally have to give 31 days notice and pay a penalty fee. Check the terms and conditions to see how much the penalty fee will be.

Linked account

When you apply for a term deposit, some providers will ask you to open a linked transaction account. This is where they will pay your interest. You should check if the linked account has any fees.

You can ask if they can pay the interest into an account you already have.

Be wary of investments that are advertised to be ‘like’ a ‘term deposit’. Products spruiking even a two or three percentage point higher return than a term deposit represent significantly higher risks.

Choosing a term deposit

Always shop around for the highest interest rate and best features before you pick a term deposit. It's important to check:

Interest rate

  • what the interest rate is
  • when interest is paid — monthly, annually or at maturity

Time frame

  • how long you can invest for
  • how interest rates change with different investment time frames

Amount invested

  • how much you need to open a term deposit
  • how the interest rate changes the more you invest

Fees

  • if there are any set-up or account fees
  • how big the penalty fee is if you need your money early

Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. See what to keep in mind when using comparison websites.

What to do when your term deposit matures

Term deposits are not a 'set and forget' investment. When your term deposit matures, your provider will contact you. They'll tell you how much interest you've earned and what your options are.

If you do nothing, your term deposit may roll over into a new term deposit. There may be a fee to get your money out of the new term deposit. It could also have a lower interest rate than before.

Review your term deposit two weeks before it matures. Compare it with other products to make sure you're getting the best deal.