A long-term term deposit is ideal for Australians who are trying to save for future financial goals. Whether it’s for a down payment on a house or university education for your child, a long term deposit will hold your money, preventing you from spending it and enabling you to earn competitive interest.
Term Deposit Offer
Bank of Sydney Term Deposit Online Exclusive
fixed for 12 months
Term Deposit Offer
$0 monthly account keeping fees. The Online Exclusive Term Deposit by Bank of Sydney offers term lengths from 1 month to 13 months. Withdraw funds before maturity without notice (fees apply).
Term deposits are a type of savings account where you can bank your money for months or years at a time, without being able to access it. You can choose the amount of time needed when you open the account, ranging from 12 - 60 months. If one year is too long for you to lock away your cash, there are also shorter terms available.
Your savings balance will have a competitive interest rate which is often calculated on your balance daily. It will be up to you to choose the frequency that interest is then paid into your account, ranging from monthly, quarterly, yearly or only at the end of the term.
How do I compare term deposits?
Your first decision when comparing term deposit accounts is to decide how long you want the term to be. Generally, the longer the term, the better the interest rate will be. Once you have an idea of how long you need to meet your savings goal, you should begin comparing available term deposits between the different banks, asking the following questions:
What is the frequency of interest payments?
Long term deposits can offer a range of different methods for receiving your interest, ranging from monthly, quarterly or yearly. Some accounts only pay interest when the account reaches maturity, however if this is the case, you'll lose the benefit of compound interest.
What are the fees?
You should be able to find a number of banks that charge minimal to no fees for their term deposit products. You should carefully research these fees before making your decision, and try to avoid any lenders that charge for early withdrawals (you never know if you will need to withdraw the money in an emergency situation).
What is the interest rate?
This is arguably the most important feature, and one that can differ dramatically between different lenders. Be sure that you are choosing an account with a competitive interest rate by market standards, as this will make a significant difference to your balance over a few years.
What is the minimum balance?
Unlike a savings account, you cannot open a term deposit with only a few hundred dollars. At minimum, you will find accounts that allow an initial deposit of $1,000, but most will expect more. Make sure you're comfortable with the amount required, and that you leave enough money available in your savings account for living expenses and emergencies.
Business bank Tyro has launched the pilot business term deposit today to existing customers with 30-, 60- or 90-day terms available initially. Read more…
Any pros and cons to consider for long term deposits?
Flexibility. With a long term term deposit you have control over how long the term is and when the interest payments are applied. This allows you to structure your account in a way that will best suit your saving needs and goals.
No fees. You will not be facing monthly deductions from your account for service fees.
Incentive to save. Facing penalties is a good incentive for not making an early withdrawal of your savings balance.
High interest rate. The longer the term, the better the interest rate will be.
No bonus interest. Unlike many savings accounts, with a term deposit for long term saving there is no bonus interest that you can earn and no introductory offer.
Accessibility. This is not an account for keeping as a rainy day fund, as it could take months to access if you needed to use your savings for an unexpected situation. This, along with the penalty charges, makes it difficult to use for an emergency.
You will not be risking your savings if your balance is less than $250,000 thanks to the Australian Government guarantee scheme. however, there are things you should avoid to ensure you are getting the most benefit from your long term deposit account:
Term deposit roll-over. The bank may roll the account into a new term deposit if you don’t let them know that you will be making your withdrawal at maturity. Before choosing to roll over the account, make sure you shop around and compare other providers rates again, as these may now be more competitive than what you're currently earning.
Early withdrawals. If you do make the withdrawal before maturity, not only will you be charged a penalty fee, but the interest calculated will be adjusted to meet the interest you would have received for a shorter term deposit. Don't do it!
Frequently asked questions
Yes, not only do some online financial institutions offer long term deposit accounts, many regular banks will also provide you with access to the account through their e-banking network.
This depends on the features the bank offers, but yes some will allow this if you want access to the earned interest.
Yes, the longer the terms the higher the interest rate amount will be.
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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