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$1,000

4.95%

for 12 months

4.95%

for 12 months

    2024 Award Winner

  • 12 months
  • Automatic maturity rollover
  • Joint application available
  • Maturity alert by email

$1,000

4.90%

for 12 months

4.90%

for 12 months

  • 12 months
  • Automatic maturity rollover
  • Joint application available
  • Maturity alert by email

$5,000

3.45%

for 12 months

3.78%

for 24 months

  • 12 months
  • Automatic maturity rollover
  • Joint application available
  • Maturity alert by email

$10,000

4.05%

for 24 months

5.00%

for 6 months

Term Deposit
  • 24 months
  • Automatic maturity rollover

$5,000

3.35%

for 15 months

4.70%

for 12 months

Term Deposit
  • 15 months
  • Automatic maturity rollover
  • Joint application available
  • Interest payment to other institution

$5,000

3.95%

for 24 months

5.00%

for 7 months

Online Term Deposit
  • 24 months
  • Automatic maturity rollover
  • Joint application available
  • Interest payment to other institution

Consider these promoted savings accounts

Promoted

ING

Savings Maximiser

Real Time Rating™
  • Bonus interest with conditions
  • App banking
  • Online banking
  • Linked account required

2024 Award Winner

*Customers must complete the following each month: 1. Deposit at least $1,000 from an external source; 2. Make 5+ settled card purchases; and 3. Grow the balance on the nominated Savings Maximiser account – i.e. make sure there’s more in the account at the end of the month (excluding interest) than there was at the end of the previous month. The total bonus interest rate is available on balances up to $100,000 on one Savings Maximiser the next month after meeting eligibility.

Maximum rate

5.50%*

p.a

Base rate

0.55%

p.a

Promoted

Westpac Banking Corporation Ltd

Westpac Life - 18 to 29 years old

Real Time Rating™
  • Bonus interest with conditions
  • App banking
  • Online banking
  • Linked account required

2024 Award Winner

*Make 5+ eligible debit card purchases on your Westpac Choice account and make at least 1 deposit into your Westpac Life Account so that your balance is higher than at the beginning of the month in your Westpac Life Account

Maximum rate

5.20%*

p.a

Base rate

2.00%

p.a

Promoted

ubank

High Interest Save Account

Real Time Rating™
  • Bonus interest with conditions
  • Online banking
  • Linked account required

*To earn bonus interest, you’ll just need to have a Spend account and deposit $200+ per month (not including internal transfers) into any of your Spend and Save accounts. Get the app and sign up in just minutes

Maximum rate

5.10%*

p.a

Base rate

0.10%

p.a

Promoted

First Option Credit Union Limited

Kids Bonus Saver < 18

Real Time Rating™
  • Bonus interest with conditions
  • App banking
  • Online banking

*Deposit at least $5 per month without making a withdrawal

Maximum rate

0.85%*

p.a

Base rate

0.05%

p.a

Looking for a financial product with the stability of a bank account, that offers you a little more in return? It may be worth considering a term deposit. 

For Australian savers, a term deposit lets you store your savings with your chosen bank and lock in a steady interest rate to grow your wealth over time. Depending on your personal objectives, a term deposit may help you to achieve your savings goals.

What's new in term deposits for March 2023?

While many Australian mortgage holders may be nervous about the predictions that there could be multiple hikes to the national cash rate this year, it could be a different story for savers. As the cash rate approaches a potential peak of 4.10 per cent, as predicted by some big bank economists, banks and Authorised Deposit-taking Institutions (ADIs) may pass these hikes on to customers in the form of higher interest rates for savings accounts and term deposits.  

Careful use of a term deposit could help some Australians lock away their savings and enjoy steady returns. This could in turn help some Australians reach their financial goals and potentially even help relieve some financial stress, which has been linked to sleepless nights.  

Some of the highest term deposit rates on RateCity at the time of writing include:

Updated by Mark Bristow on 1 March 2023



What is a term deposit?

Term deposits work much like savings accounts or investments, but with a few key differences. 

When you open a term deposit, you will put money in the bank to earn interest over a fixed term. This means you can calculate in advance how much interest you can earn on your savings, regardless of changes in the market. 

Once you’ve deposited the money with the bank, you won’t be able to easily access these funds until the end of the agreed-upon term. At the end of your term, you can withdraw your money, or choose to roll your deposit over for another term.

What features should I look for in a term deposit?

Here are some of the main features to look for in a term deposit:

  • Term deposit interest rates

The first feature to consider is the fixed interest rate, as this will determine how much interest you’ll earn on your deposit over the fixed term. As a general rule of thumb, you may find that high interest rates mean higher rate of return. It’s important to be confident that you are getting the best rate possible for your situation. 

  • Fixed term

You’ll also want to consider the term, which is the length of time that your funds will be locked away. Term deposits are usually broken up into two categories: short-term and long-term deposits. Short-term deposits can be as short as one month, while long-term deposits can last years. Longer terms often offer higher interest rates than shorter terms, but it’s best to check with your financial institution.

  • Interest payment frequency

You may want to look at how frequently you’ll be paid interest. Term deposit providers may pay interest on the following terms:

  • Annually
  • Semi-annually
  • Quarterly
  • Monthly
  • At maturity (the end of the term)
  • Minimum deposit

Term deposit providers may have minimum deposit requirements before they'll allow you to open a term deposit account with them. Providers also typically offer tiered interest rates for different minimum deposit sizes. For example, a minimum investment of $5,000 may come with a lower interest rate than a minimum investment of $250,000.

  • Rollover terms

It’s also worth thinking about rollover terms before committing to a term deposit. These are the options available to you at the end of your term, when you’re able to reclaim your deposit and interest earnings. Some providers will require a certain number of days' notice if you're planning on withdrawing your funds and closing your term deposit account.

Some term deposits will allow you to immediately reinvest your savings into a new term deposit and earn even more interest. If you do decide to reinvest right away, it’s important that you reconsider what the current interest rate is as it may have changed since you first opened your account.

You may have the option to have this interest paid into a bank account of your choice, to supplement your household income, or even put towards your home loan or outstanding credit card debt.  

Do term deposits charge fees?

You won’t typically find annual or account-keeping fees attached to your term deposit. In fact, many term deposits don’t charge any fees.

However, you should be aware of penalty fees. A penalty fee usually applies if you decide to access your money before the end of your term. These fees will vary by lender, so it’s best to check the penalty fee amount before agreeing to a term deposit. 

For a full breakdown of any potential fees, check out the term deposit account's Product Disclosure Statement. This will outline any costs as well as the range of terms you may be expected to meet to qualify for the highest interest rate.

Can I withdraw money from a term deposit?

When you apply for a term deposit, it’s often assumed that you’ll be keeping your money in the bank for the full duration of the agreed term. Some banks will allow you to withdraw part or all of the money from your term deposit early, but penalties may apply. 

To withdraw part or all of the money from your term deposit, you’ll often need to give advance notice, often 31 days. You may need to pay a penalty fee for early withdrawal. You may also see the interest rate on your term deposit reduced if you make early withdrawals, affecting the interest you’ll earn.

What are the benefits of term deposits?

One of the biggest potential benefits of a term deposit is the relatively low risk compared to some other investment options. Term deposits require you to agree on a rate before your money is locked away, which means you’ll know exactly what you should be earning. Even if variable interest rates fall, you’ll still earn your fixed rate, so there’s very little risk of losing any of your investment. 

Term deposits can help you manage your spending. After you deposit your money into your chosen account, you can no longer access it without paying a fee. As your money is practically unavailable to you for a fixed period of time, it’s much harder for you to spend this money elsewhere on everyday purchases.

Term deposits also don’t take a lot of work to maintain. Thanks to your fixed rate, your investment should earn interest and make money with barely any effort at all. This means they often appeal to people who tend to be more hands-off with their personal finances.

In terms of security, your deposit should be kept safe thanks to the government guarantee. This means that a licensed term deposit provider will have been approved by the Australian Prudential Regulation Authority (APRA) as an Authorised Deposit-Taking Institutions (ADI). This means that any deposit products will be protected under the Australian Government’s Financial Claims Scheme, which states that deposits up to $250,000, for each account holder at any ADI, are protected in the worst-case scenario the provider were to go under.

What are the drawbacks of term deposits?

One potential drawback of a term deposit is that you can’t access your money during the term without being charged a penalty fee. For some this can be a positive, but for others it can make term deposits seem restrictive. If you’re looking for a lot of flexibility and control over your finances, you might want to consider a savings account rather than a term deposit.

Another potential downside is that your term deposit rate won’t rise with the market. If variable interest rates rise, your term deposit won’t adopt a higher rate, because the same rate has been locked in for the entire length of your term.

Benefits

  • Low maintenance
  • Relatively low risk
  • Can help you manage your spending and save

Drawbacks

  • Harder to access your money
  • Won't benefit if variable rates rise

Who offers term deposits?

Most financial institutions can offer you a term deposit, including big banks, mutual banks, credit unions and online banks. If you’re already a customer, it might be especially easy to set up a term deposit with your bank, as they should already have most of your details. 

However, it’s important to keep in mind that your current bank or credit union might not offer the best term deposit for your financial situation. For example, another bank may offer a more competitive interest rate or more convenient access to your money. Comparing term deposits can help you make the best choice to suit your financial goals.

What do I need to apply for a term deposit?

Applying for a term deposit can be a lot like opening a transaction account. Once you've compared a range of term deposit options through comparison tools, such as term deposit tables and term deposit calculators, you can begin the application process.

After you’ve made your choices regarding your term deposit, you’ll need to fill out a form to apply. You'll typically need the following:

  • Proof of age (18 and over)
  • To be an Australian resident or 457 visa holder
  • Personal identification, such as a passport or drivers license.
  • Employment and income information

How to apply for a term deposit

  1. Find a term deposit with the best interest rate: Before committing to a term deposit of any kind, consider finding one with an interest rate that gives you the most to work with. The higher the interest rate, the more likely that your money will be able to make money in the background.
  2. Pick a term to leave your money: It's also important to pick a term that you're comfortable leaving your money with the bank or lender for. A term deposit is named because you're leaving your deposit for a term, and that term is one of the main factors to determine just how much money you can make. Term deposits can be as little as one month and as long as five years (60 months), though the longer you leave your money in, the more interest you could end up seeing. Pick your term carefully, because you can't just withdraw your money from a term deposit without incurring a penalty.
  3. Apply for your term deposit: When you're ready to apply, head to your bank in person or use an online form to sign up and deposit your money. Please note: ​​Some financial institutions will allow you to enter your information online, while others will require that you visit a branch. Check with the bank or lender you're using to find out which you need to do.
  4. Wait: Once you've deposited money into your term deposit, you're more or less just going to have to wait until the term has ended. Term deposits accrue interest as the deposit matures, but you can't take the money with its interest out until after the term has ended without incurring costs. Most banks and lenders will apply break fees if you take money out of a term deposit early, with a 31 day notice period also often required to do so. You may also see a reduced interest penalty if you decide to take money out before a term deposit has finished.
Fact Checked

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

Frequently Asked Questions

What is a term deposit rate?

The term deposit rate is the agreed interest rate for your term deposit. It remains fixed for the term of the deposit.

For example, if you deposit $5,000 for 12 months at a 2.5 per cent term deposit rate, that 2.5 per cent term deposit rate will be fixed for the entire 12 months and won’t change until the term matures.

The term deposit rate is one of the most important factors to consider when comparing your term deposit options. The general rule of thumb is that the longer the term, the higher the term deposit rate.

Term deposits are a popular type of investment because they’re safe and provide reliable returns.

The return you get on your term deposit will be determined by the amount you initially invest, the amount of time you choose to invest it for, and the term deposit rate.

Are term deposits compounded?

Term deposits can be compounded, depending on what you choose to do with the interest.

There are two ways to receive interest from a term deposit: either a lump sum at maturity; or paid on a regular basis, usually monthly. If you get your interest paid regularly, you can get it paid into a transaction account, or back into the term deposit account. By using this second option, you’re getting interest paid on your interest. In other words, it’s compounding.

Having the money paid into a transaction account means you can access it for your day-to-day spending, while compounding the interest means you get a better overall return on your investment. Both have advantages, depending on your needs, but be aware that some term deposit accounts that pay interest regularly may offer a lower interest rate to offset the effect of compounding.

How often do term deposit rates change?

One of the advantages of a term deposit is that this type of investment enjoys a fixed interest rate. This means that the interest rate that you have signed up for will not change during the period of your term deposit, regardless of rising or falling market interest rates.

However, it is important to be aware of the end of your term deposit. Once your term ends, whether this is in three months or three years, many banks will default to rolling over your deposit into a new term, sometimes with a lower interest rate. Once your term deposit rolls over, you will then be locked into this new fixed interest rate for another term.

Make sure to use the grace period at the end of your term to your advantage. Shop around for a competitive interest rate and reinvest your money accordingly.

Are term deposits covered by the Australian government guarantee?

Yes, term deposits are covered by the Australian government guarantee.

Under the Financial Claims Scheme, the Australian government guarantees term deposits up to $250,000, capped at one person, per financial institution.

This means that your term deposit (if it’s $250,000 or less) is protected in the unlikely event the bank, building society or credit union collapses.

If you have more than $250,000 in a term deposit with one the one bank, for example, then only up to $250,000 of your principal is covered.

If you’ve got more than $250,000 and you wish to invest in a term deposit, you could consider dividing your money between term deposits and banks (limiting each deposit to $250,000 per bank).

That way all of your deposits are protected by the Australian government guarantee and you will not suffer any financial losses.

Is term deposit interest taxable?

The interest that you earn from your term deposit is considered taxable income. Because your term deposit interest is taxable, it should be disclosed on your annual tax return.

It’s important to note that circumstances may differ depending on whether you provided the account holder with your tax file number (TFN). If you did not supply your bank or other financial institution with your TFN, they are typically required to withhold tax from your interest earnings.

If you’ve invested in a deposit that lasts longer than 12 months, you’ll need to claim your earned interest in the year that you received it. For example, if you receive interest monthly, you’ll need to claim your earnings at the end of the financial year. However, if you only receive interest at maturity, you should claim your earnings in the year that you received the lump sum of interest.

Did you find this page helpful?

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, target market determination fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.