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Savings account vs term deposit: Which one earns more?

Use our free calculator to see whether you could earn more interest from a savings account or a term deposit.

Both savings accounts and term deposits allow you to earn interest on your money. However, there are a few key differences between these accounts. Whether you'll earn more interest with a savings account or a term deposit depends on several factors including the interest rate of each, the conditions to meet, the term length and your deposit size.

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Editor's comparison

See some of the top savings account rates vs term deposit rates side by side, as chosen by Finder's money editor.

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Savings account vs term deposit calculator

Jump straight to our free calculator and compare the two options.

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How to

Here's our 3-step guide to using the free calculator (it's easy, we promise!).

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Savings accounts vs term deposits: what's the difference?

Savings accounts explained

A savings account is a bank account that allows you to earn interest on your balance. The interest rate is variable, meaning it can change at any time. Savings account interest rates tend to fluctuate in line with changes to the Reserve Bank of Australia's official cash rate. Savings accounts pay compound interest, allowing you to earn interest on your interest to help your balance grow quicker.

Savings accounts will often offer a bonus interest rate each month that you meet certain conditions, such as depositing a set amount of money and making no withdrawals. Each savings account will have different conditions to meet to earn the bonus rate. Savings accounts provide access to your money 24/7, so you can easily access it if you need to.

Term deposits explained

Meanwhile, a term deposit lets you invest a specific amount of money for a set period of time, such as 6, 12 or 24 months. During that time, the money you invest earns interest at a fixed rate (this means the rate won't change for the duration of your term). Interest is typically paid monthly, annually or when the deposit matures and is not compounded like it is with a savings account.

Unlike a savings account, the money in your term deposit is locked and you can't access the funds until the term ends. However, there are no ongoing monthly conditions to meet to earn the interest rate.

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What to consider when deciding between a savings account or a term deposit

Will you need to access the money? If you think you might need to access the money in the near future, a savings account might be a better choice as you have instant access to your balance when needed.

Do you want a set-and-forget account? If you're looking for an account you don't need to think about, a term deposit could be for you as there are no ongoing conditions to meet once it's opened.

Can you meet monthly conditions? Are you likely to be able to meet a monthly deposit requirement or spend condition? If you are, a savings account could suit you. If not, a term deposit might be a better fit.

Do you want the highest interest rate at all costs? If you're simply looking for the highest interest rate, savings accounts usually offer slightly higher rates (but there will be conditions to meet to earn it!).

Comparing savings accounts and term deposits

Let's take a look at a fictional example.

Let's say you opened a term deposit with a fixed rate of 4.00% p.a. and a deposit of $30,000. After 24 month you'd have earned $2,400 worth of interest.

If you opened a savings account with an ongoing rate of 4.00% p.a. and a deposit of $30,000, after 24 months you'd have earned $2,494.29 worth of interest. This is because savings accounts pay compound interest, so each month when you earn interest, that interest earns interest the following month.

This also assumes you don't make any additional contributions to your savings account during the 24 month period, which is unlikely. Savings accounts often require you to deposit a set amount per month in order to earn interest. So, by depositing more money each month your balance after 24 months would be even higher.

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Alison Banney
Alison Banney is the money editor at Finder. She covers all areas of personal finance, and her areas of expertise are banking, saving and superannuation.
Comparison by the editor
Here are the top savings and term deposits compared:

Term deposit

  • Challenger 12 month term: 5.35%
  • Qudos Bank ($10,000+) 12 month term: 5%
  • G&C Mutual Bank 12 month term: 5.05%

Savings accounts

  • Rabobank High Interest Savings Account: 5.75%
  • ME HomeME Savings Account: 5.55% p.a.
  • ING Savings Maximiser: 5.5% p.a.
You can use our calculator to work out which account might earn you more interest, depending on your own balance and savings style.

How to use the calculator

Finder's savings account vs term deposit calculator is quick and easy to use. All you have to do is fill in the boxes with the below information.

3 steps to use the calculator

Step 1

Enter your deposit amount

Enter the amount you're planning to invest in the account initially. This is 'initial deposit' for a savings account, or 'fixed deposit' for a term deposit. Then, for the savings account, enter your ongoing deposit (this is the amount you plan to deposit each month).

Step 2

Enter the investment period

This is the term deposit length that you'd be looking to open, for example 12 months. You might not have a set investment period in mind for a savings account, but using the same investment period as the term deposit will allow you to compare.

Step 3

Enter the interest rate

Enter the total bonus rate for the savings account you're looking at, and the fixed rate for the term deposit you're looking at, then hit calculate. At the moment, the best rates for both savings accounts and term deposits are around 4% p.a.

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