
Savings accounts vs term deposits

Have you got a lump of cash, but you’re not sure whether a savings account or a term deposit is what you need? It can be tough to tell, as both offer a place to keep your money and let it grow.
The right kind of account depends on a number of factors such as your living and working situation, age, and more. However, you might not know much about the difference between term deposits and savings accounts.
Basically, we’ll compare the ways in which a term deposit and savings account differ in the way they function, which should help you to suss out the kind of account that works best for you.
Round 1: Interest Rates
With the Reserve Bank of Australia hiking the cash rate, numerous banks have responded in turn by hiking the interest rates on their home loans, but also thankfully raising savings and term deposits rates, too.
Currently, a handful of savings account providers are offering accounts with interest rates at or over 5%. Meanwhile, term deposits only currently have one account on the Mozo database, Judo bank, offering a rate of 5% on a 5 year term.
Savings Account: Savings account interest rates are variable, which means that at any time the bank can announce an increase or decrease in the rate - typically following moves to the official cash rate. The advantage to this, however, is that savings accounts can move ahead of term deposits when it comes to the rates
Some come with competitive ongoing bonus rates if you can meet the requirements, while other providers offer higher introductory interest rates for new customers which only last a few months. Search the Mozo database for high interest savings accounts.
Term Deposit: A term deposit always comes with a fixed interest rate which is guaranteed not to change during the term of your investment. The more money you’re going to invest the better the rate. For short-term deposits, interest is usually paid at the end of the term. When it comes to long-term deposits, interest is likely to be paid annually.
Round 2: Length of deposit
Another factor to consider is the length of the deposit. For some people, they won’t need to touch their cash for a while, so they can afford to take full length term deposits which can usually go for up to 5 years.
On the other hand, you might only be able to keep your deposit away for a short period of time. This is where a savings account or a shorter length term deposit may come in hand.
Savings Accounts: You won’t have to worry about how long you keep your money in a savings account—the time is indefinite, so your hard-earned cash can grow there for as long as you want it to.
Term Deposit: When you set up a term deposit you will need to decide the length of time you wish to invest your funds. This can be anything from one month to five years. There are two main types of term deposits, short and long-term. A short term deposit is regarded as 12 months or less while a long-term deposit is anything longer than one year.
Round 3: Fees
Keep in mind the fees you might be paying when it comes to your savings as they can impede the amount of cash generated over the long term.
Savings Accounts: A lot of savings accounts don’t have fees, especially the online accounts. However, some banks do charge setup fees or other ongoing costs. If you compare our database of hundreds of savings accounts you’re bound to find plenty of fee-free options.
Term Deposit: There are usually no fees attached to term deposits. However, if you withdraw your funds before the term has matured you will usually be penalised. It’s for this reason that you should consider carefully if you will need the cash in your term deposit before maturation.
Round 4: Withdrawals
Sometimes money is short, and withdrawals may be necessary if you find yourself in a precarious financial situation. However, if this happens and you need to take money out, just note that it can negatively impact your savings due to early withdrawal fees.
Savings Account: With a savings account you generally have the option of withdrawing money at any time. However, with some accounts, you may need to deposit a certain amount at regular intervals or you may be restricted to a certain number of withdrawals. So keep in mind if you have a conditional interest rate as you might not receive the high bonus interest rate for that month.
Term Deposit: Your money is locked away in a term deposit, so you can’t touch the funds until the term has matured. If you do have to make a withdrawal before the set date penalties could apply.
Round 5: Minimum opening deposit
Savings accounts and term deposits will usually differ quite a bit when it comes to the minimum opening balance.
Savings Account: You usually don’t need to make a minimum deposit to open a savings account – you can start from zero. However, you may need to deposit a minimum amount at regular intervals to get the maximum interest rate possible.
Term Deposit: Banks like to work in round numbers, so to open a term deposit you'll often need to invest a minimum of $5,000 to $10,000 depending on the provider. The balance limits are detailed in our term deposits comparison table .
Round 6: Regular Payments & Deposits
Do you have a large sum of money that you want to have working for you immediately? Maybe you plan on depositing a certain percentage of your regular income into your money pile. Depending on the strategy you choose, you’ll find the kind of account you want to put your money into will differ.
Savings Account: You can keep on adding to your savings account indefinitely, but some providers will set a maximum limit for the amount you can earn the top interest rate on. In order to soak up the high interest rate, you're often required to deposit a certain amount every month. If you fail to make these payments the bank may lower your interest rate to the base level or pay no interest for that month.
Term Deposit: You cannot make additional payments to a term deposit. Remember though, that many term deposits allow monthly, yearly, and at-maturity interest payments so you can have your interest sit in the account and compound over time. Check out Mozo's guide to learn more about the types of term deposits you can choose from.
The pros and cons of savings accounts vs term deposits
We’ve compared the differences in features of savings accounts and term deposits, but you may still be a little unsure of the best place to store your money. So, it’s now time to break it down in a nutshell and look at the pros and cons of each to help you make an informed decision.
Savings Account Pros & Cons
Savings accounts are usually the go-to of your average saver, with banks often opening a savings account alongside a checking account. Banking apps have made savings accounts easy to manage and deposit into.
The Pros
- Online savings accounts offer high interest rates
- You'll have access to your money whenever you like
- You can make payments at any given time, building up the amount of interest you earn
- There's generally no minimum amount required to open the account
The Cons
- Interest rates can fall and a high introductory interest rate is only for a short term
- With easy access to your money savings goals may not be met
There’s no human contact with online savings accounts
- Some types of savings accounts require monthly deposits to be made
Term Deposit Pros & Cons
Sometimes you just want to “set it and forget”. With term deposits, those who want to lock away a large sum of cash they’ve accumulated can do so. As a lot of term deposits will require minimum deposits of $5,000, and it’s cash that you can’t get access to, so it necessitates either a higher income or more savings on top of the deposit. This often means older people who have accumulated some money tend to favour term deposits.
The Pros
- A fixed term deposit gives you fixed interest so If the Reserve Bank drops interest rates there’s no impact on your term deposit
- As tempting as it may be, you can’t access your savings until the term has matured
- You can plan exactly how much you’ll earn over the term of the deposit
The Cons
- You can’t access your money until the term has matured
- You'll be unable to make additional payments – learn more about term deposit features
- If interest rates rise, you might find that generous term deposit rate doesn't
- look as impressive two years down the track
Minimum deposit required starting from $5,000 or $10,000
The final decision…
If you’re still not sure what kind of account is right for you, there are a couple of questions you can ask yourself.
For one, have you got the minimum amount required to open up a term deposit? If you don’t have at least $5,000 saved up, then look for a high interest savings account.
Are you an impulse spender? Do you struggle to meet your savings goals? Then a term deposit may be your best fit as it's hands off those savings until the end of the term. If you are considering a term deposit, make sure that you have some money set aside for emergencies and unexpected bills. At the end of the day whatever savings option you choose, make sure you take the time to compare the different savings accounts and term deposits to find the best deal to suit you and your savings goals.
Savings Account Comparison Table - last updated 3 December 2023
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Mozo experts choice awards won:
- High Interest Savings - 2023
AMP Saver Account
5.20% p.a. (for $0 to $250,000)
1.20% p.a.(for $0 to $5,000,000)
Yes up to $250,000
Enjoy a bonus rate when you deposit at least $1000 per month with the AMP Saver Account.
No account fees. Unlimited transactions when linked to an AMP Bank transaction account. Easy online access to your money. Option to link your savings account to an everyday transaction account. 2023 Mozo Experts Choice Award winner.
CompareCompareAMP Saver Account
No account fees. Unlimited transactions when linked to an AMP Bank transaction account. Easy online access to your money. Option to link your savings account to an everyday transaction account. 2023 Mozo Experts Choice Award winner.
- Maximum rate
- 5.20% p.a. (for $0 to $250,000)
- standard interest rate
- 1.20% p.a.(for $0 to $5,000,000)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Ongoing total variable bonus rate of up to 5.20% per annum applies if customers deposit $1,000 in the previous month. Available only on balances up to $250,000.
- Access
- Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Ongoing total variable bonus rate up to 5.20% p.a. is earned on the balance the month after you deposit $1,000 and is paid the following month, on balances up to $250k. Max balance per customer name is $5 million.
Read our Mozo Review to learn more about the AMP Bank AMP Saver Account
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Mozo experts choice awards won:
- No Strings Savings - 2023
Savings Account
5.50% p.a. (for $0 to $250,000)
4.75% p.a.(for $0 to $1,000,000)
Yes up to $250,000
Bonus variable rate is available for the first four months.
Competitive introductory variable rate for first 4 months (on deposits up to $250,000). No account keeping fees to pay. Multiple 2023 Mozo Experts Choice Award winner.
CompareCompareSavings Account
Competitive introductory variable rate for first 4 months (on deposits up to $250,000). No account keeping fees to pay. Multiple 2023 Mozo Experts Choice Award winner.
- Maximum rate
- 5.50% p.a. (for $0 to $250,000)
- standard interest rate
- 4.75% p.a.(for $0 to $1,000,000)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Bonus variable rate is available for the first four months.
- Access
- BPay, Branch access, Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Must have a Macquarie Transaction Account to link with.
Read our Mozo Review to learn more about the Macquarie Savings Account
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Reward Saver Account
5.25% p.a. (for $0 to $1,000,000)
0% p.a.(for $0 and over)
Yes up to $250,000
Intro bonus rate of 5.25% for balances up to $1,000,000 for the first 4 months, reverting to 3.25%. Minimum deposit of $50 and no withdrawals.
Introductory bonus rate for balances up to $1,000,000 for the first 4 months. Minimum deposit of $50 and no withdrawals. Start your account online in under 10 minutes and earn interest on balances up to $1,000,000 (T&Cs apply). No monthly account fees, helping you save smarter and faster.
CompareCompareReward Saver Account
Introductory bonus rate for balances up to $1,000,000 for the first 4 months. Minimum deposit of $50 and no withdrawals. Start your account online in under 10 minutes and earn interest on balances up to $1,000,000 (T&Cs apply). No monthly account fees, helping you save smarter and faster.
- Maximum rate
- 5.25% p.a. (for $0 to $1,000,000)
- standard interest rate
- 0% p.a.(for $0 and over)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Intro bonus rate of 5.25% for balances up to $1,000,000 for the first 4 months, reverting to 3.25%. Minimum deposit of $50 and no withdrawals.
- Access
- ATM, EFTPOS, Visa Debit, Cheque book, BPay, Branch access, Phone banking, Internet banking, Bank@Post
- Minimum balance
- $0.00
- Other restrictions
- -
Read our Mozo Review to learn more about the IMB Bank Reward Saver Account
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AMP Cash Manager
No Current Offer
4.80% p.a.(for $10,000 to $250,000)
Yes up to $250,000
Earn up to 4.60% p.a variable rate with AMP Cash Manager on balances from $10,001 to $250,000. Manage and access your funds while earning interest. No transaction fees to pay. Visa debit card, eftpos, and BPAY facilities. Digital wallet payments with Apple Pay, Samsung Pay or Google Pay.
CompareCompareAMP Cash Manager
Earn up to 4.60% p.a variable rate with AMP Cash Manager on balances from $10,001 to $250,000. Manage and access your funds while earning interest. No transaction fees to pay. Visa debit card, eftpos, and BPAY facilities. Digital wallet payments with Apple Pay, Samsung Pay or Google Pay.
- Maximum rate
- No Current Offer
- standard interest rate
- 4.80% p.a.(for $10,000 to $250,000)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- n/a
- Access
- ATM, EFTPOS, Visa Debit, Cheque book, BPay, Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- -
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Mozo experts choice awards won:
- Kick Start Savings - 2023
- No Strings Savings - 2023
High Interest Savings Account
5.75% p.a. (for $0 to $250,001)
4.40% p.a.(for $0 to $250,001)
Yes up to $250,000
Bonus rate for the first 4 months from account opening
Reward yourself with a higher rate for your good savings habits with the Rabobank High Interest Savings Account . Receive the maximum rate when you grow your balance by at least $200 each month. No Account keeping fees. No minimum balance.
CompareCompareHigh Interest Savings Account
Reward yourself with a higher rate for your good savings habits with the Rabobank High Interest Savings Account . Receive the maximum rate when you grow your balance by at least $200 each month. No Account keeping fees. No minimum balance.
- Maximum rate
- 5.75% p.a. (for $0 to $250,001)
- standard interest rate
- 4.40% p.a.(for $0 to $250,001)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Bonus rate for the first 4 months from account opening, reverting to standard variable rate. Rate shown is for Personal customers and is subject to change. Different rates apply to Business/SMSF customers.
- Access
- Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Must link to a transaction account
Read our Mozo Review to learn more about the Rabobank High Interest Savings Account
^See information about the Mozo Experts Choice Savings Account Awards
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