Term deposits

Last updated: 4 November 2026

How term deposits work

A term deposit is a bank account that lets you lock away money for a fixed period and earn a fixed interest rate. Banks, credit unions and building societies (known as authorised deposit-taking institutions (ADI), offer term deposits. 

Term deposits can be useful if you want certainty about how much interest you'll earn or you're saving for a future goal and won't need immediate access to your money. 

You choose how long to invest your money for (the term), usually between one month and five years. During that time, your money is locked away. If you withdraw it early, fees or reduced interest may apply. 

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

Advantages and disadvantages of term deposits

Advantages of term deposits

Interest rate certainty

A term deposit pays a fixed interest rate for the length of your term. If you hold the deposit to maturity, you’ll know from the outset how much interest you can expect to earn making it easier to plan and save for future goals. 

Protected by the Financial Claims Scheme

The Financial Claims Scheme (FCS) is an Australian Government-backed safety net for eligible deposits. It protects eligible deposits up to $250,000 per account holder per ADI if the FCS is activated following the failure of an ADI. The $250,000 limit applies to the total of your eligible deposits with the same ADI. 

The safety net only protects eligible deposits with Australian-incorporated ADIs covered by the scheme. You can check the list of ADIs covered. 

Usually no set-up or account-keeping fees

Most term deposits don’t charge set-up or account-keeping fees. However, some providers may pay interest into a linked transaction account. Check if there are any account fees on the transaction account. Also ask if they can pay the interest into an account you already have.

Disadvantages of term deposits

Limited access to your money 

To earn interest on your term deposit, your money is locked away for a chosen period of time. If you need your money before the term ends, you may have to pay a penalty fee. You may only receive a proportion of the interest earnt, or none at all. You may also need to give up to 31 days' notice. Check the terms and conditions. 

If you are experiencing financial hardship, ask your provider whether you can access your money sooner and what conditions apply. 

Fixed rates can work for or against you 

A term deposit locks in your interest rate for the length of the term. If interest rates fall, this can be an advantage. But if interest rates rise, you may miss out on better rates available elsewhere until your term deposit matures. 

Choosing a term deposit

Don't choose a term deposit based on interest rate alone. Compare the rate, term length, fees and withdrawal conditions to find the option that best suits your needs. 

Before opening a term deposit, check: 

Interest rate	what interest rate you'll earn when interest is paid (monthly, annually or at maturity)
Term length	how long your money will be locked away  whether the term matches when you’ll need the money  how interest rates vary for different terms
Access to your money	whether you can withdraw money early  how much notice you need to give  what fees or reduced interest would apply
Eligibility and fees	how much you need to open a term deposit  if there are any set-up or account fees  whether a linked transaction account is needed  what happens when the term deposit matures

When your term deposit matures

Your provider will usually notify you before your term deposit matures. They'll tell you how much interest you've earned and what your options are.  

You will usually be able to: 

• withdraw your money and interest 
• reinvest some or all of the money in a new term deposit 
• move your money to another savings or investment product 

If you don’t provide instructions before the maturity date, your provider might automatically roll you money 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. 

Don’t rely on the provider contacting you proactively - set up a reminder for yourself about a month before your term deposit matures. That gives you time to decide: 

• whether you want another term deposit 
• what length of term will suit you 
• what interest rates, term length, fees and withdrawal conditions are being offered across providers 

Comparing your options before the maturity date can help you avoid an unwanted rollover and choose the best place for your money.