10 things that could change your mind about term deposits

Locking cash up away term deposit

During the depths of the pandemic, when interest rates hit an all-time low, locking your cash up with a term deposit for a long time wasn’t the most advantageous move. However, with a rapid increase in interest rates over 2023 and following holds in the past few months, term deposits may be in a position to earn some good interest for a while.

Let's explore some of the reasons why you should change your mind about term deposits in 2024… 

1. Locked in returns

Unlike savings accounts, term deposits offer guaranteed returns. Your interest rate is fixed at the time of investment, so market volatility does not affect your returns. This guarantee can be particularly appealing during uncertain economic times, offering a good place for your hard-earned money. 

2. Safe place for cash

Term deposits are fairly safe due to the Australian Government's Financial Claims Scheme. This means that your investment is protected up to $250,000 in the unlikely event that your bank goes under. 

It should be noted that there’s very little reason to worry as the Australian banking landscape is very well regulated. 

3. Flexible investment terms

Term deposits offer a range of investment periods, usually from one month to five years. This means you can try one out for a short stint, or you can lock in a high interest rate for a full five years. Just make sure that you only put in cash that you can afford to live without for the term you’re planning to lock it away for.

Keep in mind that, if you want to withdraw your cash early, you usually have to give the provider 31 months' notice and some kind of penalty (like a reduced interest rate). This means you can’t just pull it out whenever you like, even if you desperately need the cash. 

4. Higher interest rates for longer terms

Generally, the longer the term, the higher the term deposit interest rate will earn you. This incentivises savers to lock in their funds for extended periods, potentially leading to significantly higher returns than regular savings accounts.

That being said, due to current financial conditions, the reverse has been true for recent months. This is because the rate of inflation has been slowing which means that the likelihood of peak interest rates is high.

5. Compounding interest

Some term deposits offer the option of paying interest monthly or at maturity. Monthly and annually means that the interest earned is reinvested at the rate you choose, allowing your investment to grow at a faster rate compared to at maturity term deposits.

The picture isn’t all rosy though. Generally, you’ll receive a lower interest rate in comparison to at maturity term deposits 

6. Predictable returns

For retirees or those seeking a steady income, term deposits can provide a predictable and regular income stream. By strategically staggering the maturity dates of multiple term deposits (a technique known as a ‘ladder’ strategy), you can ensure a more consistent flow of income.

7. Inflation-beating potential

While term deposits haven’t beat inflation much in the era of cheap money, in today's high-interest-rate environment, they can offer returns that outpace inflation. That’s because some of the highest term deposit rates are sitting above 5% while current CPI from the 12 months to the December quarter is 4.1%. 

8. No fees or hidden charges

Most term deposits come with the advantage of having no setup, maintenance, or withdrawal fees. This means you know exactly what you’re getting without any unpleasant surprises.

9. Accessibility and ease of use

Opening a term deposit is usually a simple process, often accessible online through the provider's webpage. This ease of use and accessibility makes term deposits an uncomplicated option for individuals who prefer a straightforward approach to investing.

10. A step towards financial diversification

For those looking to diversify their investment portfolio, term deposits can be an excellent addition. By balancing riskier investments with the stability of a term deposit, you can create a well-rounded investment strategy.

Term deposits aren’t necessarily right for everyone as your financial situation may differ. In that case, a high interest savings account could be the better option. However, if you’re ready to make the switch, then head over to our term deposit hub page or check out some of the providers in the table below… 

Term deposit comparisons on Mozo - last updated 15 April 2024

Search promoted term deposits below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Term Deposit

    4.75% p.a.
    1 year

    $1,000

    Yes up to $250,000

    Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)

    Compare
    Details
  • Term Deposit

    4.80% p.a.
    9 months

    $1,000

    Yes up to $250,000

    Enjoy the certainty of a fixed interest rate combined with the convenience of online banking to set up and manage your term deposit at maturity. You can start investing from as little as $1,000 or up to $5,000,000.

    Compare
    Details
  • Mozo Expert Choice Badge
    Term Deposit

    4.85% p.a.
    6 months

    $1,000

    Yes up to $250,000

    Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)

    Compare
    Details
  • Online Term Deposit

    4.85% p.a.
    9 months

    $5,000

    Yes up to $250,000

    No set-up or account keeping fees. Deposits up to $250,000 per customer are guaranteed by the Australian Government. Mozo Experts Choice winner for Term Deposit 2022.

    Compare
    Details

* Different interest rates apply to different amounts or different interest payment frequencies.

^See information about the Mozo Experts Choice Term Deposit Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.