The Best Term Deposits & Rates In Australia: A Beginner's Guide

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Students want to know the banks with the best term deposit rates and how to apply for them


Have you been planning to invest in a term deposit? If yes, this comprehensive guide is for you.


Term deposits are for people seeking less risky investments giving a decent and guaranteed return. They are a good option when the government hikes interest rates to curb rising inflation.


Explore how term deposits work, why to invest in them, how to compare and find the best term deposit rates, and the steps to open your first term deposit in Australia.



1. What Is A Term Deposit?


Term deposits are a type of savings account that locks your money and invest it for a fixed period, usually between 1 month and five years. In return, investors earn a fixed interest rate during the tenure of the deposit.


It is a great investment tool for those looking for a lower-risk investment and surety of returns. Term deposits can be redeemable or non-redeemable.


The former lets you access your money before its tenure end, while the latter blocks the funds until your term ends.



2. Who Offers Term Deposits?


Several authorized Australian financial and deposit-taking institutions offer the facility to invest in this instrument. 


These include:


  • Big four banks – CommBank, ANZ, NAB, and Westpac, mutual banks, online banks, and other banks

  • Credit unions 

  • Financial services providers


APRA provides a list of Australian deposit-taking institutions that offers term deposit products for customers.



3. How Does A Term Deposit Account Work?


Term deposits are a popular investment option for people who prefer capital security and a fixed return. Generally, the money can be withdrawn at maturity or earlier with interest penalties or early withdrawal fees.


Let us understand how it works through a term deposit example: Suppose you have invested $10,000 for two years at 3%.


When the term deposit matures, you earn : Capital + Accumulated Interest (Invested capital * The Interest Percentage * The Deposit Duration).


In this case, your maturity amount will be $10,000*0.03*2 = $10,600. You will receive this amount two years after creating your term deposit.


So, how are interest rates calculated? The interest rates on term deposits vary from one provider to another and mostly depend on factors such as: 


  • The investment duration

  • Age of the investor (senior citizens generally earn a higher interest rate)

  • Amount of investment

  • The mode of interest payment (reinvestment or periodic interest payment)


Usually, term deposits with a longer duration and where the interest is reinvested earn more than short-term deposits with periodic interest payout frequency.


It is because of the "compound interest" where the reinvested interest amount also starts to earn interest increasing the overall maturity payment.


You can find term deposit calculators online that help works out your expected earnings. When you enter the investment amount and term, it calculates the interest you will make on the term deposit, including the maturity amount at the end of the investment period.


The advantage of the term deposit is that it is not affected by the highs and lows of the economy. Once you have created one, the interest rate offered remains the same throughout the tenure, regardless of the market conditions. 


When the deposit matures, you can withdraw your maturity sum (invested capital + accrued interest) in your bank account or renew it for a certain period. In the case of an emergency, you can prematurely withdraw or partially close your term deposit by informing the provider about the same.


In such a scenario, you will incur a penalty fee and earn a reduced interest rate.



4. Types Of Term Deposits


Term deposits are available in a variety of types. Before getting one, you need to consider two things to identify the best option for your needs: 


  • Learn about the different types of term deposits 

  • Compare the interest rates and other features of different term deposits (partial closure, premature closure, tax benefits, etc.)


Here, in this section, we will look at the different types of term deposits:



Short Term Deposits


  • For a period of 1 to 12 months (30 days, 90 days, six months, or 12 months)

  • Ideal for those who:

    • Have short-term saving goals

    • For those who don't want to lock in their money for a long time

    • Want to make a quick return on a large sum

    • Want greater flexibility and access to their money

  • It can be a great option to capitalize on the short-term deposit rates offered by the government to beat inflation. (As the loan and deposit rates increase, people's spending/borrowing power reduces. It causes more money to flow to financial institutions via deposits, helping combat inflation)

  • You can roll your deposit over or withdraw it at the end of the tenure.



Long Term Deposits


  • Lasts from 1 to 5 years    

  • It is perfect for people with long-term saving goals or who have a lump sum of money they don't need soon.

  • It is a good option for retired people who want a low-risk investment strategy with a regular interest income.

  • If you have long-term investment plans and are comfortable keeping your money untouched for several years, you should choose this option.



Interest Paid Monthly Term Deposits


  • This type of deposit pays interest every month. 

  • You get the compounding interest benefit, where you earn interest from your monthly interest earnings.



Low Balance Term Deposits


  • This term deposit requires no or a low minimum balance of $1,000 or below. 

  • Perfect for investors who want to avoid parking loads of cash away or prefer to have few-term deposits. 



5. How To Compare And Find The Best Term Deposit?


Assess term deposits on the following factors to find the best one for your needs:


  • Term deposit rates on varying tenures

  • Penalties (charges and interest rate deductions in case of early withdrawal)

  • Available interest paying frequency - (monthly, bi-annually, semi-annually, annually, or at maturity)

  • Whether partial closure is allowed and the associated notice period and penalties

  • Any existing interest rates offer as a loyalty bonus 

  • Ease of opening, accessing and closing a term deposit (online/in-person at the branch)

  • The minimum investment amount - (Generally, the minimum lump sum investment to open a term deposit is around $1,000).

  • Account set-up or account-keeping fees

  • Do they provide a maturity reminder, and how is it delivered?

  • Rollover terms 



6. How Do You Put Money Into A Term Deposit?


Follow these simple steps to open and fund your term deposit in Australia:


Step 1: Meet the common term deposit eligibility requirements across all providers. You must be at least 18 years of age and an Australian resident or 457 visa holder to open a term deposit in Australia.


Step 2: Start by comparing different providers to find the best-suited term deposit for your needs online. All you need to enter is the amount you want to invest, investment tenure, and interest payment method (reinvestment/ interest payout frequency).


Step 3: Once you have found one, visit the provider personally or access their website to book a term deposit. The financial institution where you wish to take out a TD may ask you to provide the following details and documents:


  • Your full name, residential address, and contact information 

  • Identity Proof, driver's licence, and Medicare card

  • Your tax file number

  • Employment and income information

  • Details of the person whom you want to make a nominee for your term deposit account 

  • Details of your nominated bank account for funds transfer to create a deposit.


Once your term deposit is approved, you can use a direct deposit or a wire transfer to fund your account with the money you wish to invest.


Congrats, you have created your first term deposit.



7. List Of Term Deposits With Govt. Deposit Guarantee Of Up To 250,000.


Please be aware that the interest rates for the term deposits below could have changed since this article was published. Always check with the bank directly for the most accurate information. Chlick on the links in the table to get the most accurate information.


The date for the below data is 20/01/2023


Financial Institution Interest Rate Minimum Deposit

My State Bank Term Deposit

1% p.a. (3 months),

1.30% p.a. for 4 months,

3.60% p.a. (for 12 months)

Bank of Sydney Online Term Deposit 2.40 % p.a. (3 months),

2.50% p.a. (4 months),

3.45% p.a. (for 12 months)
ANZ Term Deposit 0.05 % p.a. (3 months),

0.10% p.a. (4 months),

0.15% p.a. (for 12 months)
Unity Bank Term Deposit 0.50 % p.a. (3 months),

2.70% p.a. (6 months),

3.40 % p.a. (for 24 months)
Heritage Bank Term Deposit 1.60 % p.a. (3 months),

2.00% p.a. (6 months),

3.50 % p.a. (for 24 months)
Citi Term Deposit 0.50 % p.a. (1 month),

3.50% p.a. (1 year)
Judo Bank Personal Term Deposit (Monthly) 2.25 % p.a. (3 months),

2.90% p.a. (6 months),

4.75 % p.a. (for 60 months)
BCU Term Deposit 2.05 % p.a. (3 months),

2.80% p.a. (6 months),

3.70 % p.a. (for 36 months)
First Mac Term Deposit 1.95 % p.a. (3 months),

2.65% p.a. (6 months),

3.35 % p.a. (for 24 months)
Rabobank Term Deposit 2.00 % p.a. (3 months),

2.85% p.a. (6 months),

3.65% p.a. (1 year)

4.80% p.a. (for 48 months)
Challenger Term Deposit 1.70 % p.a. (3 months),

2.15% p.a. (6 months),

3.00 % p.a. (for 24 months)
LCU Term Deposit 3.60 % p.a. (3 months),

2.15% p.a. (6 months),

2.65 % p.a. (for 24 months)
G&C Mutual Fund Term Deposit 2.20 % p.a. (3 months),

2.90 % p.a. (6 months),

3.6 % p.a. (12 months),

4.00 % p.a. (for 36 months)

Gateway Bank Term Deposit 2.10 % p.a. (3 months),

3.00 % p.a. (6 months),

3.70 % p.a. (for 12 months)

Adelaide Bank Term Deposit 1.60 % p.a. (3 months),

2.00 % p.a. (4 months),

3.40 % p.a. (for 60 months)
Woolworths Term Deposit 1.55 % p.a. (3 months),

3.05 % p.a. (6 months),

3.25 % p.a. (for 12 months)



(Past performance does not guarantee future results.)



8. Frequently Asked Questions (FAQs)



How To Get The Best Term Deposit Rates?


The term deposit rates can fluctuate as per the official cash rate of the Reserve Bank of Australia.


They may also vary from provider to provider. A good term deposit rate is competitive compared to the other investment products in the market, meeting your financial goals and investment timeline.


The below ways can ensure you get a great rate:


  • Consider credit unions, digital banks, and smaller lenders, as they offer a relatively higher interest rate.

  • Invest for a more extended period as interest rates are high for longer-tenure deposits

  • Find providers that offer an additional interest rate to their loyal customers.

  • If you are a senior citizen, look for providers with higher-than-usual interest rates. National Seniors Australia offers 3.10% p.a. on a 12-month term with a National Seniors Members Term Deposit.  



Do You Pay Tax on Term Deposits?


Yes. The interest you earn on term deposits is taxable.


The amount of tax payable depends on what income bracket you fall in. Your overall taxable income will decide how much tax you are liable to pay on your term deposit interest.



Are Term Deposits Guaranteed?


Yes. Term deposits are regarded as one of the safest methods to park your money. They offer a guaranteed interest rate that remains fixed throughout the tenure, irrespective of the current state of the nation's economy and global market.


Deposit up to $250,000 is safeguarded by the government's bank guarantee scheme. The Australian Prudential Regulation Authority regulates deposits and protects term deposits up to $250,000 under the Financial Claims Scheme. 


Unlike stock market investments, your balance will never be less than your initial investment. Thus, term deposits are safe and low-risk investment options that give you decent returns in the short and long term.



Is A Term Deposit Better Than A Savings Account?


The below-term deposit vs savings account comparison will help you make the right investment decision:


  • The difference between a term deposit and a savings account is that you get a fixed interest rate with a term deposit. In contrast, with a savings account, the interest rate is variable. In other words, the interest rate may drop or rise right after depositing money into the savings account.


  • Due to variable interest rates with a savings account, there is no return guarantee. The interest rate you receive at the time of withdrawal from a savings account may be different than what it was at the time of funding your savings account.


  • Cash deposit products like savings accounts offer higher rates compared to short-term deposits. However, interest rates for longer-term deposits (3-5 years) are higher than savings account rates.


  • The money in a term deposit gets locked away for a specified time. If you need to withdraw it earlier, you are penalised. It makes it less accessible than a savings account, which allows cashing out the funds at any time at no charge. High-interest savings account often become more attractive than term deposits due to their greater flexibility.


  • With top-up payments, term deposits don't allow additional funds deposited above the initial amount. However, savings account holders can add more daily, weekly, or monthly. It may encourage a good habit of regular savings in people.


  • Choosing a term deposit or savings account depends on the prevailing market conditions. When the government raises loan and deposit interest rates, term deposits become more attractive.


  • Another difference between a saving account and a term deposit is the monthly deposit requirements. While savings account holders must maintain a minimum deposit in their account, there are no such requirements for a term deposit. However, most providers require investors to have between $1,000 to $5,000 to open a term deposit.


  • You don't incur account set-up and maintenance charges to access your savings When opening a term deposit.



The decision between selecting a term deposit or savings account may vary from person to person. It largely depends on the existing financial situation, short-term and long-term investment goals, and investment preferences (flexibility to access, ease of investment, fees & charges, etc.).



What Happens When Your Term Deposit Matures?


The term deposit matures when its term ends. At maturity, you can either cash out a portion of your money (invested capital plus interest earned) or roll over the amount into a new term deposit.


If you don't make a decision, banks often automatically reinvest the customer's term deposit funds in the default product (or potentially the same term again).


Ideally, form your choice based on your current needs and the market rates. It is better than letting your money be automatically reinvested for the same term again.



Can You Withdraw Money From A Term Deposit Account?


Yes. You can break your term deposit in the middle of the term if you urgently need money or want to shift your money somewhere else. You can withdraw all or part of the money from your term deposit early.


However, you must know you will incur penalty charges and earn a reduced interest rate for failing to keep the term deposit until maturity.



9. Conclusion


Term deposits can be attractive to savers who look for guaranteed yet average returns on their investment over a fixed period.


Along with the above information, read the product disclosure statement and speak to your financial adviser to make the best investment based on your situation.



The advice and information on is in general nature and should not be seen as a replacement for independent financial advice. We strongly encourage readers to consult with financial experts regarding their own financial decisions and investments.

Please note that the information presented on is solely for educational purposes. Every individual's financial situation is unique, and the products and services we mention may not suit everyone. We do not provide financial advice, advisory, or brokerage services nor endorse buying or selling specific stocks or securities. It's essential to know that information might have changed since publication and past performance does not guarantee future results.


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