Term deposits – How to find the best term deposit for you

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Term deposits let you invest for a set amount of time and get a fixed interest rate. They can be useful when saving for bigger items like a car or investing when you want to be certain about the interest you’ll earn.

If you want to save but might need quick access to your money, a savings account could be better.

How term deposits work

Term deposits are a way to invest your money with an authorised deposit-taking institution (ADI) and earn a fixed rate of interest.

Your money is locked away for the time that you choose (the term), usually between one month and five years. You need a minimum amount to open a term deposit, for example, $5,000.

Advantages of term deposits

Higher interest rates

Term deposits offer a higher interest rate than most transaction and saving accounts. Generally, the more money you put in, or the longer you invest, the higher the interest rate.

Protected by the Australian Government Financial Claims Scheme

The financial claims scheme (FCS) protects deposits made with Australian banks, building societies and credit unions. This guarantees to pay you up to $250,000 to replace deposits in the unlikely event your bank, credit union or building society fails. The safety net only applies to authorised deposit taking institutions regulated by APRA.

No set-up fees

Most term deposits have no set-up or account fees. But if you need your money before the term ends, you generally have to give 31 days’ notice and pay a penalty fee. Check the terms and conditions.

Linked account

Some providers may pay your interest into a linked transaction account. Check if there are any account fees or ask if they can pay the interest into an account you already have.

Disadvantages of term deposits

Early withdrawal penalties

To earn interest on your term deposit, your money is locked away for a chosen period of time. If you need your money before the term ends, you may have to pay a penalty fee. You may only receive a proportion of the interest earnt, or none at all.


Be wary of term deposit scams

Scammers are offering fake investments advertised to be ‘like a term deposit’ that claims to be a ‘new breed of investment’. Look out for:

  • Offers claiming to ‘beat inflation’.
  • Interest rates that are higher than other alternatives.
  • Guaranteed high returns.
  • Someone contacting you ‘out of the blue’ with an offer to invest.

Choosing a term deposit

Compare the features of term deposits

Always shop around for the highest interest rate and best features before you choose a term deposit. Be sure to compare products across different financial institutions. It’s important to check:

Interest ratewhat the interest rate is when interest is paid — monthly, annually or at maturity
Time framehow long you can invest for how interest rates change with different investment time frames
Amount investedhow much you need to open a term deposit how the interest rate changes the more you invest
Feesif there are any set-up or account fees how big the penalty fee is if you need your money early

Using comparison websites

Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options.


Scammers can steal your personal details by creating fake comparison websites for term deposits and other financial products. Comparison websites must be authorised and licensed to provide financial product advice for any product discussed on their website. Check the comparison website has a Financial Services Guide.

How to check it’s a term deposit

Term deposits can only be issued by a bank, credit union or building society listed by APRA as an authorised deposit taking institution (ADI). If the ADI is not on APRA’s list, then it’s not a term deposit and it will not be covered by the financial claims scheme.

Some legitimate managed funds can have investment products with the look and feel of a term deposit, but these are much higher risk. Check with the ADI to make sure it’s a term deposit.

What to do when your term deposit matures

Term deposits are not a ‘set and forget’ investment. When your term deposit matures, your provider will contact you. They’ll tell you how much interest you’ve earned and what your options are.

If you do nothing, your term deposit may roll over into a new term deposit. There may be a fee to get your money out of the new term deposit. It could also have a lower interest rate than before.

Review your term deposit a month before it matures. Compare it with other products to make sure you’re getting the best deal.



Wealthness Pty Ltd ABN 13 231 248 112 [t/a Better Financial Planning Australia] is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL No. 236523. It is important to be aware that Better Financial Planning Australia is not authorised by Infocus to provide advice relating to credit services or property advice. Infocus is not responsible for any advice outside of the scope of this authorisation and should you wish to act on any of this general information, please first seek professional financial advice.

Wealthness Pty Ltd t/as Better Financial Planning Australia will endeavour to update the website as needed. However, information can change without notice and Wealthness Pty Ltd t/as Better Financial Planning Australia does not guarantee the accuracy of information on the website, including information provided by third parties, at any time.

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Wealthness Pty Ltd t/as Better Financial Planning Australia does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, Wealthness Pty Ltd t/as Better Financial Planning Australia and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.

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Source: ASIC MoneySmart

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