Fall in love with term deposits - the savings product that no one told you about

four hands excited over a graph going up for rising term deposit rates

Commitment-phobes beware because we’re talking term deposits

This locked-in, long-term savings product might sound a little scary, but it’s time to shake off that fear. In life and in money, sometimes we have to face our fears. 

If you’re a serial shopper or on a tight budget, the idea of having money that you can’t access might feel like a nightmare. You might have heard the phrase “term deposit” floating around, but they’re often left on the wayside while we talk about high interest savings accounts or other forms of investments. 

In fact, term deposits are becoming a more approachable choice for people of any age. With interest rates for term deposits climbing, they’re more attractive than ever. A Commonwealth Bank study shows that millennials have a strong preference for using their own money over borrowing, and a term deposit can help you get more out of yours.

What is a term deposit?

A term deposit is a type of cash investment that is put away for a set length of time to accrue interest. 

Unlike a savings account, where you are able to make withdrawals as often as you want, with term deposits you are locked in to a set amount of time. These can be as long as five years, most commonly found in yearly increments between 1-5 years (hence, a “term” deposit). 

Shorter term deposits are also becoming more and more common, with many providers offering options for 1 month, 3 month, 4 month, and 6 month options along with their longer term deposits.

What’s so special about a term deposit?

Since a term deposit is locked away for a set amount of time, you are able to earn interest on a lump sum at a fixed interest rate. 

This makes term deposits a relatively safe way to invest your money. You can lock in a stable interest rate and see the return once the term is complete. 

All of this makes term deposits a great option for setting and achieving your savings goals, or putting away money you don’t have an immediate need for. With options for different lengths of time to suit your needs, this keeps your money earning interest in a stable space, away from shifts in the market and impulse spending urges.

Most options for term deposits are also free from start-up fees (score) and low-maintenance for the duration of the deposit, making them a pretty laid-back choice for storing your money.

Why wouldn’t I choose a term deposit?

Ready to start up your new term deposit long term relationship? It’s important to keep in mind that there are pros and cons to this method of accruing interest.

If you’re going to need to access that money anytime soon, a term deposit might not be for you. Withdrawing money early from a term deposit can incur hefty charges, and cause you to lose out on potential interest. 

Term deposits can also have high minimum deposits - so if you’re looking for somewhere to stash a few hundred dollars, you might have better luck storing it in a savings account

Also worth considering is the fact that term deposits have their interest rate locked in at the beginning. While this can be fantastic for avoiding volatility in the market, it can also lead to you missing out on potential interest rate rises. Not great for financial FOMO!

How do I choose the best term deposit for me?

There is no one answer when it comes to the “best” term deposit because it all comes down to your financial situation, but there are things to keep in mind:

  • How much money are you depositing? Some term deposits have high minimum deposits or notable maximum deposits, so make sure you find a term deposit that works for the money you are putting away.
  • How long do I want to deposit that money for? Keeping in mind that you won’t be able to terminate your deposit before the end of the term, without incurring a fee and in many cases losing a significant amount of interest.
  • Do you have an account with the same bank? Some term deposits offer the option to pay interest into an account with another bank, while others only allow this to happen to the same institution or to be reinvested. If this is an issue for you, it’s something to look into closely.
  • Will I remember to check in when the term expires? Many term deposits automatically rollover after their initial completion, which can lock you into another term with a lower interest rate than you should be getting - or for a lengthier term than you want.

Like with any long term decision, there’s no taking a term deposit lightly. If you’re ready to fall in love with a term deposit, we don’t blame you!

Explore and compare our range of term deposits. See our picks for best term deposits in the Mozo Experts Choice Awards.

Compare term deposits - last updated 13 August 2022

Search promoted term deposits below or do a full Mozo database search . Advertiser disclosure
  • Mozo Expert Choice Badge
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.55% p.a.
    1 year
    $1,000
    Yes up to $250,000

    Great rates and incentives incl. 0.10% added loyalty bonus at renewal. Option to have interest paid to another bank. Winner of the Mozo Experts Choice Awards 2021^ for Term Deposits.

    Details
  • Mozo Expert Choice Badge
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.25% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Competitive rates for one year term deposits. Start investing with as little as $5,000 to $1,000,000. For personal customers who want to invest above $500,000, or for non-personal customers, contact Challenger’s call centre to discuss account application options.

    Details
  • Hot Deal Earn a competitive rate of 3.24% half yearly or 3.25% annually on an 18 month term
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.10% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Deposit of $5,000 up to $5 million. Choose a term from 1 month to 5 years. Select a range of convenient interest payment options. $0 establishment or ongoing fees. Easy tracking using the mobile banking app.

    Details
  • Mozo Expert Choice Badge
    Online Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.05% p.a.
    1 year
    $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.

    Details
  • Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.30% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Competitive interest rates available. Terms ranging from 1 month to 5 years. No account fees to be paid. Interest can be paid to another account. Option to choose when interest is paid. Minimum deposit of $5,000 required.

    Details

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

^See information about the Mozo Experts Choice Term Deposit Awards

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