Term deposits are bank accounts that lock away your money for a set period of time, usually ranging from one month to five years. In return, you earn a fixed rate of interest for the agreed term, even if your bank’s rates for new customers change during that time. Term deposits tend to suit investors and savers who prefer a low-risk option with a near-guaranteed rate of return, as opposed to investing in riskier but potentially more lucrative assets such as shares and property. Interest rates on term deposits are relatively low at the moment because of today’s low interest rate environment. That being said, savers who are willing to shop around may still be able to find some good options.
If you’re interested in a term deposit, it’s also worth knowing you may be charged a penalty fee, or earn a reduced rate of interest, if you decide to access your funds before the end of the term. In addition, there is a chance that the interest rate you secure may drop if you decide to ‘roll over’ your money to a new term once your existing one has matured. On the flip side, some institutions may offer a bonus interest rate to reward savers who roll their investment into a new term. Check with your institution to see what options you may have when your term comes to an end.
Term deposit rates from the big four banks
The following table displays a snapshot of term deposits with a term range between 12-24 months from the big four banks – ANZ, Commonwealth Bank, NAB and Westpac – with interest paid as specified in the table below. The results shown are based on an investment of $50,000 in a personal term deposit and are sorted by the highest advertised interest 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.
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.
You can view a wider range of providers and terms using Canstar’s term deposit comparison tables. We’ve also rounded up the highest term deposit rates currently on offer from all the providers in our database, not just the big four banks.
Should you consider a term deposit from the big four?
You might be tempted to go with one of the big four banks because of name recognition or because you already have another product with them. However, the big four banks tend to offer many of the same benefits as other providers when it comes to term deposits. For example, deposits made into banks, building societies, credit unions and certain other authorised deposit-taking institutions are guaranteed by the Australian Government up to $250,000 per customer under the Financial Claims Scheme.
One area where the big four may offer more than other providers is branch accessibility. The big banks have a high number of branches and other customer support services available, which can potentially make it easier to apply for and manage term deposits. However, you would need to weigh up whether this convenience factor is worth it overall.
When comparing term deposits, you may want to consider factors such as:
- The interest rate on offer (the higher the interest rate, the greater your return will typically be from the term deposit)
- The terms (lengths of the term deposit) available to choose from
- When interest is paid (monthly, annually or at maturity)
- Any minimum amount needed and whether a higher interest rate is offered for a larger amount
- Whether early withdrawals come with penalties or fees
As always, it’s important to also read the product disclosure statement (PDS) or speak to any banks you’re considering before opening a term deposit so you’re aware of the terms and conditions.
This article was originally written by William Jolly. It was reviewed by our Sub Editor Tom Letts 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, and Canstar on Facebook.
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