Types of Term Deposits

26 October 2016
Co-author: TJ Ryan
If you’re looking into finance, you may have heard of people investing their spare cash in “term deposits”. We look at the different types of term deposits available in Australia.  

What is a term deposit?

A term deposit is an investment of cash placed with a financial institution for a fixed period of time, known as the term, with a fixed interest rate for your return at the end of the term. Term deposits are commonly referred to as TDs but are also known as a certificate of deposit (CD).

Fixed terms can generally range from 1 month up to 10 years, and the money can usually only be withdrawn at the end of the term. ‘Advance notice’ term deposits allow you to withdraw the money earlier if you pay a penalty fee and give advance notice of 31 days.

Term deposits are popular for use by investors who prefer receiving a set return instead of anxiously watching the daily fluctuations of the share market. Other investors use term deposits as just one part of their particular mix of investments.

Types of term deposits

There are six main types of term deposits, and they are:


How much can you save


1.       Short-term deposits
2.       Long-term deposits
3.       Advance notice term deposits
4.       No notice term deposits
5.       Interest paid monthly term deposits
6.       Low balance term deposits


1. Short-term deposits

A short-term deposit generally lasts anywhere from 1 to 12 months. It is recommended for people with short-term saving goals, or who are not willing to lock their money away for years. Due to the shorter terms available, these accounts tend to have much lower interest rates than long-term deposits, so the return on investment is not as high.

2. Long-term deposits

A long-term deposit can last anywhere from 1 to 10 years. It is recommended for savers with long-term savings goals, or who have a lump sum that they don’t need in their regular spending budget. This can be a good option for retirees looking for a low-risk investment strategy; however, it’s important to remember your money will be untouchable for years at a time.

3. Advance notice term deposits

An advance notice term deposit is a term deposit that you’re able to make a withdrawal from.  It just requires you to give at least 31 days’ notice before you withdraw. These types of accounts are becoming increasingly popular due to their high interest rate however, in the event of an emergency; there will be at least a 31 day delay in receiving your payout.

4. No notice term deposits

These term deposits allow you to make a withdrawal and don’t require any notice period beforehand. They are a good option if you want the flexibility to access your funds without the 31 day waiting period and in the event of an emergency. Generally with these types of accounts, you’ll end up with a lower interest rate, and you may be better off opting for a savings account anyway.

5. Interest paid monthly term deposits

Recently, some providers have been offering deals that have the option of paying your interest monthly. A pro that comes with this option is that your interest will start to earn interest. It’s important to consider the fact that due to having your interest paid monthly, you may have a lower interest rate which may not matter all that much in the long run.

6. Low balance term deposits

Typically, all term deposits require a minimum balance to get started and these can range greatly. Low balance term deposits have a required minimum balance of $1000 or below and sometimes even no minimum at all. It is recommended for savers who don’t have a lot of cash to lock away, however, the lower the balance, the lower interest it accrues.

The above advice is general and has not taken into account your objectives, financial situation, or needs. Consider whether this advice is right for you. Consider the product disclosure statement before making any purchase decision. For more information, read our detailed disclosure, important notes and additional information.

Compare term deposits with Canstar

As you can see, when it comes to choosing a term deposit, there are a lot of options to choose from. Ensure you do plenty of research in order to find the right one to suit your needs.

Fortunately, we have compared over 90+ term deposit rates to help simplify this process. Compare term deposit rates with Canstar today:


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