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Are term deposits safe?

With fixed interest rates and the backing of a government bank guarantee, term deposits are one of the safest financial products available. The only downside is that your money is locked away for a while.

How safe are term deposits?

Term deposits are a safe, low-risk financial product. Unlike most investments, you can't lose money. And unlike a savings account, your rate won't go down if rates change.

With a term deposit, you lock up the money with your bank at a fixed rate, for a fixed period. At the end of the term deposit your investment matures and you receive the original deposit plus the interest you've earned.

Your return is fixed and guaranteed, unlike with an investment property or investing in the stock market.

Term deposits and the Financial Claims Scheme (FCS)

The only way you could theoretically lose money with a term deposit is if the bank collapsed. And bank accounts, savings accounts and term deposits are protected by the Australian government's Financial Claims Scheme.

Under the FCS, any money you deposit with a bank is protected, up to a total value of $250,000 per person, per bank.

Organisations protected under the FCS must be authorised deposit-taking institutions (ADIs). Any bank, including building societies and credit unions, will almost certainly be an ADI, but you can check via APRA's ADI register.

Finder survey: Why do Australians get a term deposit?

Most Australians who open a term deposit do so to earn a guaranteed return.

Response
Get a guaranteed/risk-free return36.36%
Meet a savings goal30.45%
Diversify investment portfolio15%
Prevent spending13.64%
Other4.55%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023

Are there any term deposit risks?

Term deposits are basically risk-free. But you need to understand how they work and their drawbacks.

Any financial product represents a risk if it's not suitable for your specific needs.

You can't access your money once it's locked away

Unlike a savings account, with a term deposit you put the money away and forget about it.

But what if you signed up for a 12-month term deposit and then, 6 months in, you suddenly need the cash?

Banks let you withdraw money from a term deposit before maturity. But:

  • There might be an early withdrawal fee
  • You could lose any interest you might have earned
  • Some banks require a notice period of up to 31 days

In an emergency you can access money in a savings account much faster than in a term deposit.

Term deposits offer a modest return

You could get a higher return (with higher risk) by investing the money. Sometimes even high interest savings accounts have slightly higher rates.

Your rate is fixed

Your term deposit rate won't change. This means it won't go down. But in a period of rising rates you can miss out on better returns.

Let's say you locked in a 3% term deposit for 24 months and then rates started rising. Now your bank is advertising a term deposit rate of 5%. You would miss out on a higher return.

Watch out for automatic rollover

Unless you specify otherwise, many banks automatically roll over a matured term deposit into a new term deposit.

Your bank should notify you close to the term deposit's maturity date. If you don't want the account to roll over, make sure you tell your bank beforehand.

Term deposit comparison

1 - 7 of 180
Name 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.
Judo Bank Term Deposit
Judo Bank logo
Finder Award$1,000 min. deposit
3 Mths p.a.
5.00%
4 Mths p.a.
-
5 Mths p.a.
-
6 Mths p.a.
5.25%
7 Mths p.a.
-
12 Mths p.a.
5.25%
24 Mths p.a.
5.20%
Go to siteMore Info
Newcastle Permanent Term Deposit
Newcastle Permanent logo
$1,000 min. deposit
3 Mths p.a.
3.50%
4 Mths p.a.
3.50%
5 Mths p.a.
3.50%
6 Mths p.a.
5.05%
7 Mths p.a.
3.80%
12 Mths p.a.
4.80%
24 Mths p.a.
4.00%
Go to siteMore Info
BCU Term Deposit
BCU logo
$1,000 min. deposit$999,999 max. deposit
3 Mths p.a.
4.60%
4 Mths p.a.
4.80%
5 Mths p.a.
3.40%
6 Mths p.a.
4.70%
7 Mths p.a.
4.00%
12 Mths p.a.
4.50%
24 Mths p.a.
4.40%
Go to siteMore Info
MyState Bank Online Term Deposit
MyState Bank logo
$5,000 min. deposit$50,000,000 max. deposit
3 Mths p.a.
2.50%
4 Mths p.a.
4.20%
5 Mths p.a.
5.10%
6 Mths p.a.
4.60%
7 Mths p.a.
3.50%
12 Mths p.a.
5.00%
24 Mths p.a.
3.95%
Go to siteMore Info
Great Southern Bank Term Deposit Account
Great Southern Bank logo
$5,000 min. deposit$1,000,000 max. deposit
3 Mths p.a.
4.90%
4 Mths p.a.
2.95%
5 Mths p.a.
2.95%
6 Mths p.a.
5.20%
7 Mths p.a.
3.05%
12 Mths p.a.
5.20%
24 Mths p.a.
4.40%
Go to siteMore Info
Judo Bank Business Term Deposit
Judo Bank logo
$1,000 min. deposit
3 Mths p.a.
5.00%
4 Mths p.a.
-
5 Mths p.a.
-
6 Mths p.a.
5.25%
7 Mths p.a.
-
12 Mths p.a.
5.25%
24 Mths p.a.
5.20%
Go to siteMore Info
Great Southern Bank Platinum Plus 55+
Great Southern Bank logo
$5,000 min. deposit$1,000,000 max. deposit
3 Mths p.a.
-
4 Mths p.a.
-
5 Mths p.a.
-
6 Mths p.a.
-
7 Mths p.a.
-
12 Mths p.a.
5.30%
24 Mths p.a.
4.50%
Go to siteMore Info
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Showing 7 of 17 results

Written by

Alison Banney

Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full profile

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8 Responses

    Default Gravatar
    marcelDecember 23, 2022

    HI there ,are term deposits the safest way the save? Can anybody hack in a term deposit account and commit fraud.
    Kind Regards
    marcel

      AvatarFinder
      AlisonFebruary 22, 2023Finder

      Hi Marcel,
      Term deposits are one of the safest ways to invest. Your deposit up to $250k in an Australian bank term deposit is protected by the government bank guarantee scheme.
      Like with any account you have, you need to keep your account information secure and not share passwords or log in details with anyone.
      Thanks,
      Alison

    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

    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

    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
      MayAugust 22, 2017Finder

      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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