Term deposits can be a safe and reliable way to grow your wealth over a set period of time (usually between one month and five years). They allow you to earn a fixed rate of interest for the agreed term, even if your bank changes the rates for new customers during that time.
However, term deposits can also be inflexible. For example, if you need to access your money before the end of the term, your bank may charge you a penalty fee and ask you to give them a period of notice.
The interest rates on term deposits also tend to vary a lot, depending on the provider and the term. With movements in both directions possible, it can pay to consider shopping around.
The following table displays a snapshot of term deposits with a term range between 11-24 months with interest paid as specified. This is based on an investment of $50,000 in a personal term deposit and is sorted by the highest advertised rate for a 12-month term, and finally by shortest payment frequency. For more information and to confirm whether a particular product will be suitable for you, check upfront with your provider and read the Product Disclosure Statement before making a decision.
| Company | Interest Payment Frequency and Features | 11 months | 12 months | 13 months | 15 months | 18 months | 24 months |
|---|---|---|---|---|---|---|---|
| Judo Bank | Personal Term Deposit | Paid end of term | – | 1.23% | – | – | – | 1.45% |
| Judo Bank | Personal Term Deposit | Paid annually | – | 1.23% | – | – | – | 1.40% |
| BankVic | Term Deposit (l20) | Paid annually | – | 1.15% | – | – | 1.10% | 1.10% |
| Judo Bank | Personal Term Deposit | Paid monthly | – | 1.13% | – | – | – | 1.35% |
| BankVic | 12 Months Regular Income | Paid annually | – | 1.10% | – | – | – | – |
| Teachers Mutual Bank | Term Deposit | Paid annually | – | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% |
| UniBank | Term Deposit | Paid annually | – | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% |
| BankVic | 12 Months Regular Income | Paid quarterly | – | 1.10% | – | – | – | – |
| BankVic | 12 Months Regular Income | Paid monthly | – | 1.10% | – | – | – | – |
| Teachers Mutual Bank | Term Deposit | Paid monthly | – | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% |
| UniBank | Term Deposit | Paid monthly | – | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% |
| BankVic | 12 Months Regular Income | Paid fortnightly | – | 1.10% | – | – | – | – |
| Source: Canstar, as at 2 November 2020. | |||||||
Compound Interest
Interest earned on an initial amount of money invested, as well as on the accumulated interest. Interest can be compounded at different frequencies, such as monthly, semi-annually, annually and so on. The compounding frequency, the number of compounding periods and the interest rate will determine the amount of interest earned on a term deposit investment.
How can I choose a term deposit?
While important, a high interest rate isn’t the only factor to consider when looking for a term deposit. Some other factors you might want to keep in mind include:
- The terms available (length of the term deposit) and the interest rates available for various terms
- When interest is paid (this might be monthly, annually or at maturity, for example)
- Whether there is any minimum amount needed to open a term deposit, and whether a higher interest rate is offered for a larger amount
- Whether there are any penalties or fees for early withdrawals
It’s also important to be aware that your interest rate may drop if you decide to ‘roll over’ your money to a new term, once your existing term has matured. On the other hand, there are selected providers who offer bonus interest if you roll over your term deposit. Check with your provider to see what options you have and what terms and conditions may apply.
You can compare term deposits based on your own financial requirements from a range of different institutions using Canstar’s comparison tables.
This article was reviewed by our Sub Editor Jacqueline Belesky and Finance Editor Sean Callery before it was updated, as part of our fact-checking process.
Tamika Seeto is a Finance Journalist at Canstar. She joined the team after completing a Bachelor of Journalism and Bachelor of Laws (Honours) at QUT, and has past experience writing for a variety of publications across news, music and the arts. At Canstar, Tamika’s writing tackles everything from superannuation and insurance to the latest budgeting apps worth downloading. Tamika understands the world of finance can seem daunting at times, so she strives to break it down in a way that is easy to understand and relatable. You can follow Tamika on LinkedIn.
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