Term deposit benefits and pitfalls to know before you stash your cash

It’s understandable if you’re becoming increasingly cautious about where to store your hard-earned nest egg in 2020. The March RBA rate cuts and uncertain economic environment hasn’t been kind to savers, even with some banks recently giving term deposits a boost.

RELATED ARTICLE: All the recent rate changes you’ll want to know about for savings accounts.

So if you’re considering a term deposit as the new home for your savings, you’ll want to be very clear about the benefits of this fixed interest option, as well as any features that might sting uninformed customers.

Generally, if you’re investigating a term deposit, you’ll already have a lump sum which you’re looking to grow, and won’t need to dip into anytime soon. If this is you, read on for Mozo’s expert assessment of term deposits, as well as comparisons of term deposits from banks and other lenders.

Term deposit benefits

Market slumps won’t affect your savings. That’s the beauty of a fixed rate – as long as you see out the term, you’re guaranteed to receive the returns you signed up for, so it’s perfect for cautious savers.

It’s low maintenance. Because you aren’t required to meet any deposit or transaction conditions, you can simply set and forget a term deposit. You’ll reap the benefits as interest earnings roll into your linked transaction account monthly, or as a bundle once the term matures.

You can wave goodbye to fees. Term deposits generally don’t have any startup or ongoing fees, and as long as you don’t withdraw early, you won’t encounter any other costs.

It’s government guaranteed. Like any deposit up to $250,000 secured in an Authorised Deposit-taking Institution (ADI), term deposits will be reimbursed by the Australian government in the unlikely event that the bank goes bust. ADIs include all banks, credit unions and building societies licensed by the Australian Prudential Regulatory Authority (APRA). Hint: All term deposit providers in the Mozo database are ADIs. 

Term deposit pitfalls

Your dosh isn’t accessible. This is particularly important information during times of economic instability. If you need to withdraw money from a term deposit before maturity, you’ll see a rate reduction and get hit with a penalty fee. Avoid this by being 100% sure your costs can be covered by other sources and savings before starting the account.

Rates may not be as high as you think. Term deposit rates depend on timeframes, so don’t confuse the highest advertised rate with what you’ll receive if you are committing  to a different term. Also watch out for revert rates that may decrease once the term is up, and reduced rollover terms if you forget to collect your deposit upon maturity.   

You can’t make extra deposits. So if you’re just starting out on your savings expedition, a term deposit probably isn’t the right fit for you while you build up that lump sum.

You’ll miss out on any rate hikes. While your locked-in rate will save you from market downturns, it naturally means you won’t benefit from increased interest rates like you might with savings stashed in a variable account.

Term deposit rates

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 101 term deposits.
Last updated 13 July 2024 Important disclosures
  • Mozo Expert Choice Badge
    Term Deposit

    5.25% p.a.
    6 months

    $1,000

    Yes up to $250,000

    Great rates and incentives incl. 0.10% added loyalty bonus at renewal. Option to have interest paid to another bank. Winner of the Mozo Experts Choice Awards 2024^ for Term Deposits.

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    Details
  • Online Term Deposit

    5.00% p.a.
    1 year

    $5,000

    Yes up to $250,000

    No set-up or account keeping fees. Deposits up to $250,000 per customer are guaranteed by the Australian Government. Mozo Experts Choice winner for Term Deposit 2022.

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    Details
  • SMSF Term Deposit

    5.25% p.a.
    6 months

    $1,000

    Yes up to $250,000

    Apply digitally in minutes and manage your SMSF Term Deposit. Flexible cash flow management with three interest payment frequencies that suit you: monthly, yearly, or at maturity. Choose from terms of 3 months up to 5 years. No application or monthly account fees but eligibility criteria and terms and conditions apply. Only accessible to SMSFs with two or up to four individual trustees or one corporate trustee.

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    Details
  • Mozo Expert Choice Badge
    Term Deposit

    5.10% p.a.
    6 months

    $10,000

    Yes up to $250,000

    Minimum $10,000 deposit. No account keeping fees. Terms from 3 months up to 2 years. Interest can be paid into a different bank. Balances up to $250,000 are guaranteed by the Australian Government. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^

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    Details
  • Mozo Expert Choice Badge
    Term Deposit

    5.25% p.a.
    1 year

    $1,000

    Yes up to $250,000

    Great rates and incentives incl. 0.10% added loyalty bonus at renewal. Option to have interest paid to another bank. Winner of the Mozo Experts Choice Awards 2024^ for Term Deposits.

    Compare
    Details

* 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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