Term deposit accounts

How to find the highest term deposit rates

 Is a term deposit better than a high interest savings account? 
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Need to know

  • It’s hard to find a term deposit that has higher interest rates than savings accounts.
  • A term deposit gives you certainty as rates are fixed for the term. But you’ll have to pay break costs if you need the money earlier.
  • Beware of rolling over a term deposit at the end of the term as it may change to a much lower rate.

Term deposits fix your savings for periods between one month to up to five years. Interest is often paid at the end of the term but sometimes also monthly, quarterly or annually for longer-term investments.

But are term deposits better than high interest savings accounts? We give you the lowdown on term deposits to help you find the best deal for your needs.

Are term deposits better than high interest savings accounts?

In the past, term deposits offered higher interest rates than high interest savings accounts, particularly over longer terms. But term deposit interest rates have fallen. 

At a time of record low interest rates, you’d be hard-pressed to find a term deposit rate higher than the highest rate offered by a high interest savings account.

High interest savings accounts are also more convenient: you can access your money at any time and don’t have to pay a break fee as with a term deposit. 

But a term deposit could be a good option if you like the financial discipline to have the money locked away so you can’t touch it. There are some good rates available for term deposits if you shop around and check for special deals.

How do term deposit rates compare with high interest saving accounts?

The following information is from 29 October 2020.

High interest accounts

  • 2% (0.55% standard rate) Rabobank High Interest Savings Account. Bonus rate condition: for the first four months from account opening, reverting to standard variable rate.
  • 1.6% (0.1% standard rate) Up Savers account. Bonus rate condition: make five or more card purchases per month from Up Everyday account. Balances up to $50,000.
  • 1.6% (0.8% standard rate) Heritage Bank Online Saver account. Bonus rate condition: for the first four months from account opening, reverting to standard variable rate.

Term deposits rates for a $10,000 term deposit

  • 1.20% – 6 month Judo Bank term deposit
  • 1.23% – 12 month Judo Bank term deposit
  • 1.55% – 3 year Judo Bank term deposit

ANZ, Westpac, CBA and NAB term deposit rates

The following information is from 26 October 2020.

How do term deposit rates from the big banks compare

We’ve selected the best rates available for a $5000 term deposit for a term of up to 12 months*.

ANZ – 0.75% for 10 months

CBA – 0.65% for 12 months

NAB – 0.6% for 12 months

Westpac – 0.65% for six months

* 31 days notice required and a break fee applies if you want to get your money early.

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Advantages and disadvantages of term deposits

Advantages

Certainty – rates are fixed for the term and your return remains the same, even if the RBA changes rates.

Financial discipline – if you’re saving for a long-term goal, such as a house deposit or a new car, it helps to have your money locked away so you can’t touch it.

Disadvantages

Break costs – if you need your money early, you’ll have to pay a fee. The fee can be larger than the interest you earn, so you could end up with less money than you started with.

Roll-over trap – if you let your term deposit roll over at the end of the term, you can end up with a much lower interest rate. 

How to find the highest term deposit rates

  • Rates vary depending on the amount of your deposit, the institution and the term, so shop around. 
  • Look at all the terms available from the institution. For example, when we looked in October 2020, ANZ offered 0.75% for a 10-month term deposit but only 0.6% for nine or 11 months.
  • Look for specials. Financial institutions sometimes decide to promote a specific term – for example, six months — for their best rates. Watch for ‘blackboard specials’ outside branches, too.
  • Institutions are covered by the Australian Government Deposit Guarantee Scheme, introduced during the GFC, which covers each bank customer up to $250,000 per institution. Only ADIs can offer deposit accounts.
  • Don’t let your term deposit roll over. Always check for the best rates available even if you don’t want to switch banks.
Uta

I've been at CHOICE for over 20 years, starting as a research assistant and nowadays a senior content producer in the money and travel team. I am originally from Germany and my background is in journalism; I started in my teens at my local paper and then studied journalism in Germany and Australia. I hold a Master in History and Politics from the Technical University of Berlin, a Graduate Certificate in Journalism from UTS and a Certificate IV in Financial Advising from the Securities Institute in Sydney. Over the years I have worked on all types of financial topics – from credit cards to reverse mortgages and kids bank accounts. My main interest and expertise is in health insurance and I am member of the government health insurance website reference group of the Commonwealth Ombudsman.    I love working at CHOICE because I feel that we can make a real difference helping consumers to get a fair go. You can find me on Twitter and LinkedIn.

I've been at CHOICE for over 20 years, starting as a research assistant and nowadays a senior content producer in the money and travel team. I am originally from Germany and my background is in journalism; I started in my teens at my local paper and then studied journalism in Germany and Australia. I hold a Master in History and Politics from the Technical University of Berlin, a Graduate Certificate in Journalism from UTS and a Certificate IV in Financial Advising from the Securities Institute in Sydney. Over the years I have worked on all types of financial topics – from credit cards to reverse mortgages and kids bank accounts. My main interest and expertise is in health insurance and I am member of the government health insurance website reference group of the Commonwealth Ombudsman.    I love working at CHOICE because I feel that we can make a real difference helping consumers to get a fair go. You can find me on Twitter and LinkedIn.

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