Guide to term deposits

A term deposit is one of the easiest and safest ways to invest your savings. Simply nominate an amount of money and how long you'd like to lock it away for and by the end of that period a nice stack of interest will be waiting for you. But do you have to pay tax on that interest? And if so, when does it have to be paid? If you've been thinking about signing up for a term deposit, we've answered some commonly asked questions.

For anyone who’s looking to grow their savings, term deposits can be a risk-free and reliable option. Nominate an amount of money and how long you’d like to lock it away and a nice stack of interest will be waiting for you once that time is up.

When you’re trying to make the most of your term deposit interest, you’ll want to make sure you pick all the right options. 

If you’re considering a term deposit as a savings strategy, you’re probably most concerned with how much interest you’ll be able to squeeze out of your rainy day fund. And that depends largely on what interest rate you manage to snag.

You’ve done the hard work of saving and squirrelling away every spare dollar, decided a term deposit is the best place to park your money and now you can kick back and forget about it, right? Wrong!

Are you a serial monogamist? Don’t have a problem going in for the long haul and making a serious commitment? Well then, apply that to your savings strategy with a long term deposit, for a low-risk way to earn a return on your rainy day fund.

One of the great things about a term deposit is that it’s not only a low risk way to earn a return on your savings, but also a pretty low maintenance one. That doesn’t mean there aren’t some great tricks to making your term deposit work harder for your money - but it does mean that opening a term deposit is a pretty stress-free process.

Are you sitting on the fence about investing in a term deposit?

So you’ve decided a term deposit is the best place for that nice Christmas bonus, or the nest egg you’ve been working on, but now the question is, where do you go to get one? The answer might seem easy - the bank, of course - but there are heaps of options when it comes to choosing where you want to open a term deposit.

If you’ve picked a term deposit to be your savings strategy, then the next big question is: how long do you want to lock your hard earned cash away?

If you want to commit your money to a term deposit but you’re not quite ready to lock it away for the next few years, then a short term deposit might just be the solution you’re looking for. It's still low-risk and a stable way of earning a return on your savings, but without the commitment of not touching your funds for years on end.

Are you looking for a place to stash your cash that will earn you high returns and protect you against rate movements in the market? Then a term deposit could be just for you!

So you’ve decided to lock your funds away in a term deposit to grow. Good for you! By this point, you probably already know what a term deposit is - a stable, long-term savings strategy that can help you maximise the size of your rainy day fund with minimal effort on your part.

Here are some tips from the mozo team for getting the best value from your term deposit

It's a question asked by savers of all sorts: should I stash my cash in a term deposit or savings account?

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.

They’re one of the newest kids on the block in the world of Australian term deposits, but Judo Bank certainly aren’t content with just blending in.

Pensioners are continuing to draw the short straw when it comes to deposits, according to new Mozo analysis. Mozo found that on a balance of $53,000, the average pensioner account rate now sits at a mere 0.62%, which is a whopping 163 basis points below the deeming rate of 2.25%. “Although the government assumes pensioners are getting at least 2.25% annual return on every dollar over $53,000 in savings or investments to determine their pension income, the numbers tell a different story,” said Mozo Director, Kirsty Lamont.Pensioners who have cash stashed away with the big four banks aren’t winning either, as Mozo’s analysis shows that the average return ranges from 0.21% to 0.35%. “Times have never been tougher for pensioners when it comes to generating an income from their savings, so following the third official rate cut this year it’s time the government did the right thing by older Australians and reduced the deeming rate,” said Lamont. AMP and Bendigo Bank were the providers offering the lowest pensioner rate in the Mozo database, while ANZ’s 9-month (0.15%) and 12-month (0.20%) term deposit rate are the lowest rates for those terms for any bank recorded in Mozo’s database. “There is not a lot of good news around for those in the market for a term deposit, with 86 deposit-takers slashing rates in the past two months and more cuts likely before Christmas as the latest official cash rate continues to wash through the market,” Lamont explained. BankVic currently has the highest 12-month term deposit rate at 1.05%, while the average 12 month rate sits at 0.64%. Mozo calculated that a $25,000 investment with the BankVic 12-month term deposit would see you earn $263 in interest, compared to $160 on the average term deposit rate.

In November another Reserve Bank cash rate cut occured, and since then Mozo has counted an astounding 785 reductions to term deposits. The average cut was 13.7 basis points and the average rate for a one-year term fell 11 basis points to 0.65% p.a.*

Article updated on 5 November 2020.