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Are term deposits safe?

With fixed-interest rates and the backing of the government guarantee term deposits are one of the safest investments available, but there are still a few things to consider before opening one.

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If you’re looking for a stable and secure investment opportunity, term deposits could be the perfect choice. They offer a fixed interest rate that won't change for the duration of the term (so you don't need to worry about any market volatility), and your deposit up to $250,000 is protected by the government.

How safe are term deposits?

Term deposits are one of the safest investments around. Unlike other investments, for example shares or property, there is almost no risk of losing the money you deposit. There are no establishment or ongoing service fees attached to term deposits (unless you withdraw your funds early), so you don’t have to worry about hidden fees and charges eating away at your savings balance.

These accounts allow you to earn a fixed interest rate on your account balance, so you don’t have to worry about falling interest rates harming your savings like you do with a savings account. This also means that you can calculate exactly how much interest you will earn on your term deposit, allowing you to budget for future expenses and investments ahead of time.

In short, term deposits are a safe place to park your money and let it grow. There’s no ongoing account management required and virtually no risk attached to your investment.

Term deposits and the Australian Government Guarantee

Similar to bank accounts and savings accounts, term deposits are protected by the Australian Government Guarantee. Under this arrangement, deposits of up to $250,000 in an Authorised Deposit-taking Institution (ADI) are guaranteed by the Australian government. In other words, if the bank with which you open a term deposit gets into financial trouble and collapses, you won’t lose any money as it'll be covered by the government. The majority of banks, building societies and credit unions are including in this scheme.

This $250,000 cap applies per person and per ADI. This means if you have $500,000 to invest, you can put half of it in a term deposit with one bank and the other half with another bank to make sure the whole lot is covered.

Term deposits you can open today

1 - 7 of 93
Name Product 3 Mths p.a. 4 Mths p.a. 5 Mths p.a. 6 Mths p.a. 7 Mths p.a. 12 Mths p.a. 24 Mths p.a.
MyState Bank Online Term Deposit
1.00%
1.30%
2.00%
1.75%
2.15%
3.05%
3.35%
Single or joint account-holders can apply online with MyState's online application process.
Pay no account setup or ongoing fees and choose a term length between 3 months and 2 years, with interest paid at maturity.
Citibank Term Deposit $10,000
1.00%
-
-
1.50%
-
2.25%
-
Suited to customers with deposits between $10,000 and $249,999.
This term deposit is for new Citi customers only
Rabobank Term Deposit
0.85%
-
-
2.10%
-
3.00%
3.30%
Suited to customers with deposits between $1,000 and $2,000,000.
With a Rabobank Term Deposit you will receive a competitive rate on your deposits and the choice of a 1, 3, 6, 9 or 12 month term.
Bank of Queensland Term Deposit ($5,000 - $249,999)
1.25%
0.10%
0.10%
2.00%
2.50%
2.75%
3.00%
Great Southern Bank Term Deposit Account
1.25%
0.50%
0.50%
2.00%
0.55%
3.00%
3.40%
No account set-up fees or ongoing fees to pay.
The Great Southern Bank Term Deposit offers a large range of term lengths from 1 month to five years. Minimum opening deposit is $5,000.
Judo Bank Term Deposit
1.15%
-
-
1.85%
-
2.95%
3.64%
Earn a 0.10% p.a. loyalty bonus when you roll over your term.
The Judo Bank Term Deposit term lengths range from three months to five years. Minimum opening deposit is $1,000. No account-keeping or set-up fees to pay.
Macquarie Bank Term Deposit
1.25%
1.25%
-
1.90%
-
2.75%
3.30%
Lock in an interest rate for up to 5 years with a Macquarie Bank Term Deposit.
This account is available to personal customers, as well as business customers and trustees.
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Benefits of term deposits

There are several reasons why term deposits are so safe:

  • The interest rate is fixed. The interest rate on your account is fixed for the duration of the term, so even if the Reserve Bank lowers the official cash rate, your deposit won’t suffer.
  • Guaranteed returns. A fixed-interest rate means you know ahead of time exactly how much interest you will earn.
  • You can’t dip into your savings. There are access restrictions in place to make it difficult to withdraw your money before the deposit matures. That being said, you're free to access the money if you really need it.
  • There are no fees. There are no establishment or ongoing fees to chip away at your savings.
  • Your money is protected. Deposits of up to $250,000 are protected by the Australian Government Guarantee, which means there is basically no risk of losing your money.

Are there any term deposit risks?

Although term deposits are a safe and secure investment, they’re not without some drawbacks.

  • Your money is locked away. It can be costly to access your term deposit funds before your account has matured. Early withdrawals can incur fees and interest rate deductions. Also, you can’t top up your deposit with extra funds.
  • Advance notice required. Some banks require you to provide advance notice in writing (31 days on new deposits) if you want to withdraw funds before maturity. Keep this in mind if you’re ever likely to need urgent access to the money in your term deposit. This can also be a good thing though, as it means you can't access the money for impulse purchases.
  • Automatic rollover. Unless you specify otherwise, many banks will automatically rollover a matured term deposit into a new term deposit. The new account will feature the same investment term, which may no longer be suitable for you, and you will receive the current interest rate available from your bank for that specific term. However, there may be better rates available from other banks if you shop around, so make sure to compare your options before accepting an automatic rollover.
  • Higher interest rates available elsewhere. You may be able to access higher interest rates on other types of savings accounts, such as high interest savings accounts or bonus saver accounts.
  • You can’t take advantage of interest rate rises. While investing your money in a term deposit protects you against falling interest rates, it also means you can’t take advantage of any rate rises that occur. So if you lock your money away for an extended term, you run the risk of missing out on substantially better returns elsewhere.

More guides on Finder

  • Illawarra Credit Union Term Deposit $25,000+

    Earn a special fixed interest rate for terms of 1 or 2 years in length when you invest at least $25,000.

  • Gateway Bank term deposit

    Earn a fixed interest rate on a wide choice of terms with a Gateway Bank personal term deposit.

  • Citibank Term Deposit $10K

    Earn a competitive fixed interest rate on Citibank term deposit when you invest $10,000 or more.

  • Judo Bank Term Deposit

    Earn a competitive interest rate plus bonus interest when you roll over your deposit into a new term deposit. Terms from 3 months to 5 years. No fees.

  • Challenger Term Deposit

    Earn a competitive interest rate on terms between 1 month and 2 years with a Challenger term deposit.

  • ANZ Business Notice Term Deposit

    This account offers fixed interest rates for terms ranging from one month to five years, so you can enjoy secure, guaranteed returns on your business funds.

  • RACQ Bank Term Deposit

    Choose a term from one month to five years and earn a competitive, fixed interest rate on your deposit. This account is for Queenslanders only.

  • Locked savings accounts

    If you struggle to save, you could benefit from a savings account that won’t allow you to withdraw funds.

  • Paying tax on term deposit interest

    Find out all about the tax treatment of term deposit interest payments.

  • AMP Bank term deposit $100,000+

    Earn a competitive interest rate on deposits over $100,000 and enjoy flexible term lengths with the AMP Bank term deposit.

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6 Responses

  1. Default Gravatar
    CinderellaFebruary 1, 2018

    How much does the Government Backed Guarantee cover?
    If I had more than that amount to invest, would that guarantee cover a second investment as well?

    • Default Gravatar
      AshFebruary 16, 2018

      Hi Cinderella,

      Thank you for reaching out to us.

      The covered amount of the Government Guaranteed Scheme is $250,000 for every account-holder and every Authorised Deposit-taking Institutions (ADIs). If you have separate accounts with different protected institutions with less than $250,000 deposits, you will be covered for both accounts. In case you have $250,000 with two different “brands” but they’re operated under the same bank, you’ll only get $250,000 in total.

      You won’t be covered by the deposit amount over $250,000. You can learn more about the Australian Government Guarantee Scheme.

      I hope this helps.

      Please do not hesitate to reach out to us again if you have additional questions.

      Cheers,
      Ash

  2. Default Gravatar
    GarrySeptember 5, 2017

    If a married couple have a savings account with a balance of $600,000, is the government guarantee an amount of $250,000 EACH or $250,000 in total

    • Default Gravatar
      DanielleSeptember 6, 2017

      Hi Garry,

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      The Australian Government guarantees deposits up to $250,000 in Authorised Deposit-taking Institutions (ADIs) such as banks, building societies or credit unions. This means that this money is guaranteed if the institution collapses. This cap applies per person and per ADI. You may refer to this page for more information https://www.finder.com.au/bank-protect-money.

      I hope this helps.

      Cheers,
      Danielle

  3. Default Gravatar
    CarmenAugust 21, 2017

    Hi

    If I have invested in 2 term deposit with 2 different banks are both accounts protected up to the $250000 govt guarantee per acct or is it only the one

    • Avatarfinder Customer Care
      MayAugust 22, 2017Staff

      Hi Carmen,

      Thank you for your inquiry.

      The $250,000 cap applies per person and per ADI (such as your bank, building society or credit union). If you have $250,000 deposit with one ADI and $250,000 with another, then both of your deposits are guaranteed. However, if you have multiple deposit accounts with “brands” that are owned by the same ADI (bank), the guarantee will only apply to $250,000 of these funds in total.

      So to make sure how much you’ll be guaranteed for, I would suggest that you check the ADI you bank with your two deposit accounts if they are one company or not.

      Hope this helps.

      Cheers,
      May

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