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Types of Term Deposits

By Maria Gil ·
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watering your term deposits to earn some interest

Before you make the decision that a term deposit is for you, it’s worth comparing not only the interest rates and deals on offer, but also the type of term deposits available, so you can find one to suit your budget and lifestyle.

We’ve broken down the different kinds of term deposits commonly on offer to help you decide.

Short term deposits

comparing piggies in size the way you compare term deposits
What is it?A term deposit lasting anywhere from 1 to 12 months.
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?A term deposit lasting from 1 to 5 years.
Who is it good for?Savers with long term goals, or those who have a lump sum - maybe a Christmas bonus or inheritance - that they won’t need in their regular budget. Long term deposits are also great for retirees who are looking for a low risk investment strategy.
Any catches?You have to plan long term - your money will be practically untouchable for years at a time, and that can make unexpected emergencies a big issue!

Top tip: Look around and secure a competitive interest rate before locking into a long term deposit - you’ll be stuck with it a while.

Make sure to check out our full guide to long term deposits to learn more.

Advance notice term deposits

a hand putting a speech bubble into a piggy bank
What is it?A term deposit that requires you to give at least 31 days notice before you withdraw early. 
Who is it good for?If you think you’ll end up making an early withdrawal for unnecessary spending, this waiting period could be long enough to make you change your mind and save you from heavy penalties.
Any catches?An advance notice term deposit will delay you getting your hands on your cash in the case of an emergency.

Top tip: If your term deposit matures before the 31 days notice period, then don’t apply for early withdrawal. You’ll still have to wait for the maturity date, plus you’ll be charged the early withdrawal fees.

No notice term deposits

What is it?Less common nowadays, are term deposits that don’t require any notice period before you’re able to make early withdrawals.
Who is it good for?This is a good option if you want the flexibility to access your funds without waiting the typical 31 days. So if an emergency does occur you'll be able to get your hands on your money without a notice period. That being said, if you're expecting to access your funds in a hurry, you might be better off opting for a savings account.
Any catches?Although it’s not a hard and fast rule, generally, you’ll wind up with a lower interest rate if you opt to avoid the advance notice period on your term deposit.

Top tip: It’s always a good idea to have a separate emergency fund - maybe in a high interest savings account - so you won’t need to suddenly withdraw early from your term deposit.

Interest paid monthly term deposits

people measuring their options
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.

Savings accounts

holding a savings account piggy bank in your hands

Ok, so it’s not exactly a term deposit, but a savings account is like the term deposit’s cousin - and it might be the right option for you. Check out the basics below.

High interest savings account

What is it?A place to stash your cash so it’s harder to get to than in a bank account, but easier than a term deposit.
Who is it good for?Savers who may need access to funds in the near future, whether it's to withdraw or deposit.
Any catches?If you aren’t so good with savings discipline, it's a lot easier to spend the money in a savings account than it is a term deposit.

Top tip: Make sure you qualify for bonus interest offers! Requirements might include making no withdrawals or minimum deposits in a month - try setting up automatic payments to make the later easier.

Notice saver

What is it?A savings account where you need to give a certain notice period before withdrawing (often 30 or 90 days). Think of it as a blend of savings account and term deposit.
Who is it good for?Savers who may need access to their funds, but have a problem with impulse spending. The notice period ensures you won’t be drawing on your rainy day fund for passing wants.
Any catches?Notice accounts, and savings accounts in general, have variable rates. That means your interest might be affected by rate drops in the market in a way it wouldn’t be with a term deposit.

Top tip: The great thing about this is that while the money is harder for you to spend, it’s easy to make deposits into a notice saver account - so plump up your balance regularly!

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 real 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 to find some of the best deals on the market today.

Term Deposit Comparison Table - last updated 24 April 2024

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Maria Gil
Maria Gil
Money writer

Maria Gil writes across all of our personal finance areas here at Mozo. Her goal is to help you think smarter about money and have more in your pocket. Maria earned a journalism degree in Florida in the United States, where she has contributed to major news outlets such as The Miami Herald. She also completed a masters of digital communications at the University of Sydney. When Maria isn’t busy with all things finance, you can find her tucked away reading fantasy books. She is also ASIC RG146 (Tier 2) certified for general advice.

* 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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