Types of Term Deposits
Before you decide that a term deposit is for you, it’s worth considering what kind you want to keep your funds in. Whether you're a short-term saver or a long-term investor, there's likely a term deposit option that fits your needs.
We’ve broken down the different kinds of term deposits commonly on offer to help you decide.
Short term deposits
| What is it? | A term deposit lasting anywhere from 1 to 12 months, generally. |
| Who is it good for? | People with short term savings goals or who aren’t willing to lock their savings away for years at a time. |
| Any Catches? | Generally speaking, shorter term deposits don’t offer interest rates as high as those on long terms. |
Top tip: Try opting for a short term deposit with a rollover option. That way, you’ll have the opportunity to withdraw - or deposit - more funds when the original term runs out, but you also have the option to extend and save for longer. Just make sure you check the rollover rate is still competitive!
Check out our full guide to short term deposits here.
Long term deposits
| What is it? | Usually a term deposit lasting from 1 to 5 years or more. |
| Who is it good for? | Individuals looking for higher interest rates and who can commit their funds for an extended period. |
| Any Catches? | Your money is locked away for a longer time which means less flexibility if you need to access your money. |
Top tip: Consider laddering your long-term deposits. This involves splitting your money into multiple deposits with staggered maturity dates, giving you more frequent access to your money while still benefiting from higher rates.
Advance notice term deposits
| What is it? | A term deposit where you need to give notice (usually 31 days) before withdrawing your funds. |
| Who is it good for? | Savers who want a bit more flexibility than a traditional term deposit, but still want to earn a competitive interest rate. |
| Any Catches? | Interest rates may be slightly lower than standard term deposits, and you'll need to plan ahead if you want to access your money. |
Top tip: If your term deposit matures before the 31 days notice period, don’t apply for early withdrawal. You’ll still have to wait for the maturity date, plus you’ll be charged early withdrawal fees.
Interest paid monthly term deposits
| What is it? | Although term deposits are mainly paid either annually or at maturity, some deals offer the option of having interest paid monthly. The best part about it is the compounding effect - your interest will start to earn interest. |
| Who is it good for? | Although you still can’t get your hands on the monthly interest until the end of the term, savers with short attention spans might stay motivated by seeing interest roll into their account each month! |
| Any catches? | Usually, if you choose to have your interest paid monthly, the bank will give you a lower interest rate, which means the compounding effect of frequent interest payments may not matter all that much in the long run. |
Top tip: Maximise your balance when you make the initial deposit - the larger the balance, generally, the more interest you’ll earn on it.
Interest paid monthly term deposits
| What is it? | Although term deposits are mainly paid either annually or at maturity, some deals offer the option of having interest paid monthly. The best part about it is the compounding effect - your interest will start to earn interest. |
| Who is it good for? | Although you still can’t get your hands on the monthly interest until the end of the term, savers with short attention spans might stay motivated by seeing interest roll into their account each month! |
| Any catches? | Usually, if you choose to have your interest paid monthly, the bank will give you a lower interest rate, which means the compounding effect of frequent interest payments may not matter all that much in the long run. |
Top tip: Maximise your balance when you make the initial deposit - the larger the balance, generally, the more interest you’ll earn on it.
Low balance term deposits
| What is it? | All term deposits require a minimum balance to get started - and sometimes, they can be pretty high. A low balance term deposit is one that has a required minimum balance of $1,000 or below, or no minimum at all. |
| Who is it good for? | Savers who don’t have a heap of cash to lock away, or those who’d prefer to have multiple smaller term deposits. |
| Any catches? | The lower the balance, generally the lower the interest it accrues. Check out our term deposit calculator to work out what different balances will mean for your interest earning power. |
Top tip: If your strategy is to opt for multiple term deposits with smaller balances, stagger the maturity dates, so each term ends at a different time. That way, you’ll get your savings back bit-by-bit, like a paycheck from yourself! This can be a great plan for retirees who are living off their savings and need to keep their spending under control.
Things to think about when choosing a term deposit
Here are a few things to keep in mind when you choose a term deposit:
- Savings goals - are you saving for a short term or long term goal? This will determine which term is best for you.
- Savings habits - do you want to make regular deposits? If so, a savings account might be a better choice for you.
- Your budget - will your monthly budget allow you to lock those funds away? Make sure you still have enough in the coffers to pay for everyday essentials, like groceries and rent.
- The interest rate - you’re stuck with the one you choose until the term runs out, which can be a good thing if you choose wisely, or a pain if you haven’t done enough research and picked a competitive deal.
Find a term deposit
Have you picked the best kind of term deposit for you yet? If you need more info before going ahead, check out the rest of our term deposit guides. Or if you’re ready and raring to go, head over to our term deposit comparison page for more providers.
* 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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