Finding the right term deposit for your situation can help you reach your savings goal faster. Here at finder.com.au we understand that not all investors are the same, so we've compared a range of term deposits with competitive interest rates and different term lengths.
You can instantly compare Australian term deposits in the table below by entering your deposit amount and number of months you intend to invest for. Click on "Calculate" to see how much interest you can earn.
Term Deposit Offer
UBank Term Deposit Account
fixed for 6 months
Term Deposit Offer
Customers who reinvest their term deposit upon maturity receive a 0.10% loyalty bonus. The 5 and 7 month terms are UBank's Green Term Deposits, where your money will be matched to a portfolio of renewable energy projects.
You may be wondering what the Big Four banks offer when it comes to term deposit rates, and how this differs to the rates offered by other banks. Compare ANZ, CBA, NAB and Westpac term deposit rates for a $5,000 deposit in a 6-month term below.
Read this guide to compare some of Australia's best term deposit interest rates for October 2019.
What is a term deposit and why should you invest in one?
A term deposit is an account that is opened for a certain period of time. During this period your funds are locked, so you won't be able to access it (penalties apply if you do). Your money earns interest according to the interest rate that is stated by the financial institution when opening the account. This interest rate is fixed, meaning it won't change throughout the life of the term. After the period has ended, you can choose to reinvest a portion or all of the funds at the interest rate stated by your bank, or you can withdraw the funds.
Term deposits are widely considered to be a safe, low-risk investment as, unlike savings accounts, they offer a guaranteed return through a fixed interest rate. Because your money is locked away, banks often offer a higher interest rate on some term deposits than they do on regular savings accounts. If you have a chunk of money you know you won’t need for a while, a term deposit could be a good option. It removes the temptation to spend the money as you'll need to pay a fee if you wish to withdraw before the term is finished.
Term Deposit vs High-interest Savings: What's best for you?
How to compare term deposits
Like most financial products, there is no best term deposit account. The account that suits your needs and circumstance the best is the one you should choose. But what is best for you, might not be best for someone else. You should look for:
A competitive interest rate
A duration that suits you
A minimum deposit amount you're comfortable with
How often interest is calculated and whether or not it is compounded
Any ongoing fees that may apply
What happens if you break the term of your deposit?
Can you withdraw a portion of the deposit without incurring a penalty?
How often will you receive statements?
Can you easily check on the balance in your account (for example with a mobile banking app)?
What happens to the deposit when it matures? For example, will it automatically roll over into another term deposit?
Compare term deposit rates based on duration
If you have a specific term length for which you want to lock away your savings and earn interest, it's crucial to compare the different interest rates available for your desired term length. Use our term length guides below to compare term deposit interest rates for various term deposit lengths.
If you’ve invested money in a term deposit, you will need to pay tax on the interest income you earn. The amount of tax you'll need to pay on your term deposit interest will depend on your overall taxable income, and it will also depend on when you receive your interest payments.
As an Australian resident you must pay tax on any income you earn each financial year, and this includes the interest you earn from savings accounts and term deposits. Read our guide to find out how this works.
The main difference between a savings account and a term deposit is the ability to access your money. The money in a savings account can be accessed whenever you need it, and there's no costs for withdrawing or depositing money. Term deposits are locked and will charge you if you need to withdraw your money early. So if you want easy access to your money, then a term deposit might not be right for you.
Another key difference is the interest rate; savings accounts have variable interest rates meaning they can change, while term deposits have fixed interest rates meaning the rate will not change until the term matures.
The Reserve Bank of Australia's (RBA) cash rate is one of the factors that bank's consider when setting their interest rates for deposit products. Given that the RBA aims to keep inflation between 2 - 3%, an interest rate of 2.5% or lower on your term deposit could mean that your investment isn't keeping up with inflation. Term deposits, like other investments, are great when the RBA cash rate is high. But when the cash rate is low, you may want to seek alternatives, such as shares.
Generally a good time to invest in a term deposit is when the RBA cash rate is high, as this normally results in higher interest rates for savings products.
The downside of a term deposit is that you can’t access your money while it is in the account. If you do need to make a withdrawal you'll need to give at least 31 days notice and you’ll be charged a fee for accessing your money before the term has been completed. You could also be charged an interest rate penalty, which could defeat the purpose of the investment in the first place. In cases of extreme financial hardship this rule can be waived."
If your term deposit has reached maturity, that is, has reached the end of the agreed period then you withdraw all the funds like a regular bank account. However, if your term deposit is still maturing, then your bank will charge a penalty for withdrawing your funds early. To do this, you'll need to get in touch with your bank directly.
Most banks will require an Australian residential address in order to open a term deposit.
Shirley Liu is Finder's global program manager. She was previously the publisher for banking and investments and has also written comparisons for energy, money transfers, Uber Eats and many other topics. Shirley has a Master of Commerce and a Bachelor of Media, Journalism and Communications from the University of New South Wales. She is passionate about helping people find the best deal for their needs.
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