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What are the different types of term deposits?
If you’re looking to invest in a term deposit you might want to consider the different types of options available to you. We take a closer look at how term deposits work.
20 Dec 2024
If you’re looking to invest in a term deposit you might want to consider the different types of options available to you. We take a closer look at how term deposits work.
Key points:
- The amount of interest you accrue depends on what options you choose when investing in a term deposit.
- You need to consider the interest rate, the term, the amount to invest and any fees with any term deposit.
- Canstar recognises those offering quality products in our annual Term Deposit Awards.
A term deposit is an amount of money you invest with an institution for a certain period of time, known as the term, at an agreed interest rate. You generally don’t have access to that money until the end of the term, known as maturity.
You then have the option to either take your investment with the accrued interest, or rollover some or all of the amount in a new term deposit. The amount of interest you accrue depends on what options you choose when investing in a term deposit.
What are my term deposit options?
If you’re looking to invest in a term deposit then these are some of the options you need to consider, according to the Australian Government’s Moneysmart website.
The interest rate
- the interest rates available
- how often the interest is paid – monthly, quarterly, annually or at maturity.
The time frame (the term)
- how long you can invest your money
- how interest rates change with different investment time frames (terms)
The amount invested
- how much you need to open a term deposit
- how the interest rate changes the more you invest
The fees
- if there are any set-up or account fees
- any penalty fee if you need your money early
So let’s take a closer look at each of the options to see how they might affect any term deposit you’re considering.
What interest rate can I get on a term deposit?
The interest rate on a term deposit usually varies depending on how long you wish to invest your money. Generally, the term deposit rate increases the longer you invest, to a point.
With some financial institutions the term deposit rate may decrease with longer term investments than mid-term investments. It’s always wise to check with any institution you’re considering to see how the interest rate varies.
Canstar can help you compare some of the best term deposit interest rates in Australia.
How long can I invest in a term deposit?
You can usually invest in a term deposit from anywhere between one month up to about five years, depending on the institution.
The thing to remember is that you’re hoping to lock away your money for the term of the deposit. If you want to access your money before the end of the term you may lose out on any interest, and penalties may apply.
That’s something to consider if you think you may need access to your money at some time during the term of the deposit before it matures.
If that’s the case, you might want to consider investing your money in a savings account where you can access it at any time. Canstar can help you compare savings accounts to help you find one that might be suitable for your needs.
How much can I invest in a term deposit?
You can usually invest anything from as little as $1,000 to more than $1 million in a term deposit, depending on the institution.
In some cases, the more you invest means you may be able to get a higher term deposit rate.
How much you should invest, though, depends very much on your own circumstances and what you can afford, remembering that the aim is to lock away the money for a set period of time.
What are the fees on a term deposit?
Most term deposits have no set up or account fees, according to Moneysmart. But you may incur fees or penalties if you wish to access your money before your term deposit matures.
You might want to check first what those fees and penalties would be before investing in any term deposit with an institution.
You may also need to give a number of days notice, typically up to 31 days, before you are able to get early access to your money.
How to compare term deposits?
Once you’ve decided how much you want to invest in a term deposit you can use Canstar to compare what’s on offer from the number of providers listed on our database.
You can select the amount, the type of term deposit you’re after – whether it’s personal, business or some other use – then select the term of the deposit you’re interested in, from 1-4 months to three years or more.
You can then sort the results by the term deposit rate for various term durations. But remember to look at more than just the interest rate when deciding what investment might be best for your circumstances.
When considering any term deposit investment you should read carefully the Target Market Determination (TMD) and other relevant documents to see if it’s right for you. You might consider seeking some independent financial advice.
You might also want to consider the financial institutions Canstar recognises as offering quality term deposit products across rates, terms and product features in our annual Term Deposit Awards.
PROMOTED
No ongoing fees on any Term Deposit account
Covered by FCS government guarantee
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Interest paid end of term
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For deposit amounts $1,000 - $2,000,000
Glossary
PROMOTED
Protected by the Australian Government's guarantee
Manage your term deposit online
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Interest paid end of term
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For deposit amounts over $5,000
Glossary
PROMOTED
Interest paid at maturity
For investments $1,000 - $999,999.99
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Interest paid end of term
-
For deposit amounts $1,000 - $999,999
Glossary
Cover image source: insta_photos/Shutterstock.com
This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.
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