Why you should think about a term deposit in 2024

As the year comes to a close and we reflect, some of us might be thinking about how we might better go about achieving our savings goals. You might not realise it but savings accounts aren’t the only tool in our financial belt. 

That’s where term deposits come in. While not as widely used as savings accounts, term deposits offer their own set of quirks that can make them a valuable tool in your savings belt. 

Fixed interest vs variable

Calculating the return on your savings account can be a great way of seeing how much your cash is yielding. However, the variable nature means that any time the RBA decides to hike or cut the cash rate, the interest on your savings account will also change. This is great if you get a hike, but any cuts will mean your savings are bringing in a lot less than you might have planned for.

Alternatively, a term deposit gives you a fixed interest rate for the term. Now, this is also a double-edged sword because the benefit of hikes won’t pass on but cuts won’t affect you either. Depending on market conditions, shorter or longer period term deposits can have more or less favourable interest rates, too. For instance, if banks are expecting cuts in the not-so-distant future, they’ll tend to give the highest rates to the shorter terms like 1 year over a 5 year term.

Why now could be a good time for term deposits

Most economists think we may be at the height of the current interest rate cycle. Those who think that the RBA has one more hike left in the tank are pointing towards February, although recent CPI data does suggest that inflation is slowing. 

Once rates start getting cut, locked in term deposits will stay where they are. So, for 2024, a term deposit might be a good long term strategy to hold onto the perks of high interest rates for longer. 

Savings account or term deposit

Advantages of term deposits

Term deposits have a couple of advantages over savings accounts that may be worth considering such as:

  • Certainty around interest rates: As mentioned before, a fixed interest rate with a set term means you know exactly what you’re getting and for how long.
  • Set and forget: No maintenance is required, you deposit your cash into the account and watch it grow. 
  • Commonly offered: If you want to stick with your current bank, they likely offer a term deposit. 

Disadvantages of term deposits

While term deposits have a lot of positive aspects to them, there are certain disadvantages to be aware such as:

  • Illiquid: Term deposits are not ideal for when you need cash in a pinch. If you do need to access your term deposit cash, then you might have to take a hit to your interest rate and wait for up to 30 days.
  • Lump sum: Generally, you won’t be able to contribute any more to the term deposit. To add more cash, you usually have to roll over at maturity to a new term.

Check the link for a deep dive into term deposit pros and cons.

If you’re ready to get started with term deposits, then you can head over to our term deposit hub page. Alternatively, compare some of the providers below… 

Term deposit comparisons on Mozo - last updated 21 February 2024

Search promoted term deposits below or do a full Mozo database search. Advertiser disclosure
  • Term Deposit

    4.75% p.a.
    1 year

    $1,000

    Yes up to $250,000

    Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)

    Compare
    Details
  • Term Deposit

    4.75% p.a.
    6 months

    $1,000

    Yes up to $250,000

    Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)

    Compare
    Details

* Different interest rates apply to different amounts or different interest payment frequencies.

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