Term deposits vs savings accounts

Ah, the age old question asked by savers everywhere: should I stash my cash in a term deposit or savings account?

Both have advantages, and both have disadvantages - which one is better for you will come down to a number of things, like how you like to save, how you want to spend and what your goals are. Which all means one thing, really: that the choice is yours.

But to help you decide, we’ve broken down some of the pros and cons of both savings accounts and term deposits, and then stuck them in the metaphorical boxing ring to see which comes out on top in a range of different areas.

Check out the results below.

What is a term deposit?

A term deposit is a secure, low risk investment strategy. When you put your money in a term deposit, you lock it away for a fixed term, to earn interest at a fixed rate. The catch is that you can’t make withdrawals or deposits until that term is up.

Want to know more? Check out our full guide to what a term deposit is.

Why should I choose a term deposit?

A term deposit might be a good savings strategy for you if you’re after a low risk way to grow your stash, and you want the security of a fixed rate. This is one of the reasons term deposits are favoured by retirees, as their nest egg is protected against any changes in the market.

A term deposit might also be useful for you if you need a helping hand to stop yourself from dipping into your savings unnecessarily - heavy penalties for early withdrawals mean you're much more likely to leave your emergency fund for real emergencies!

What is a savings account?

A savings account is more flexible and accessible than a term deposit. It allows you to put your money away in a place that’s separate from your everyday bank account, but can easily be accessed if you need it. You can also make regular deposits to a savings account with no trouble at all.

The tradeoff for this added flexibility is that a savings account has a variable interest rate attached - which means if market rates go down, the amount of interest you earn goes with them.

For more info, head over to our guide to read up on everything you need to know about stashing your cash in a savings account.

Why should I choose a savings account?

The main drawcard of a savings account is that it’s accessible, but not too accessible. A savings account might be right for your money if you don’t want to spend it straight away, but you do want to have the ability to manage it by making withdrawals and deposits when you need to.

How do they compare on...


Winner: Term deposits.

While a savings account isn’t exactly a high risk investment, term deposits win on this score because of their fixed rate, fixed term features. You’re ensured a stable, secure return on your money for the life of the term deposit.

The interest rate on your savings account, on the other hand, is subject to market conditions.


Winner: Savings account.

When your funds are in a savings account, you can withdraw or deposit pretty much as you like. The only thing you might need to be aware of is any requirements you need to meet to score bonus interest, which might include making no withdrawals or a minimum deposit in a month.

With a term deposit, on the other hand, you’ll pay hefty penalties if you decide to withdraw early, and making extra deposits is usually not an option.


It’s a draw.

One of the best things about a term deposit is that it’s fee free as long as you don’t withdraw early. A savings account is mostly fee free as well, unless you want to make a withdrawal over-the-counter in a branch.

So as far as fees go, term deposits and savings account are pretty much on par.

Extra features?

Winner: Savings account.

A savings account will often offer features like bonus interest rates, different facilities to access your money (such as a linked transaction account and debit card), and options for setting up automatic payments.

On the other end of the scale, a term deposit is very simple - you put the money in and can mostly forget about it until the maturity date rolls around.

Interest rates?

It’s a draw.

Interest rates are often comparable on term deposits and savings accounts - especially if you qualify for bonus interest on your savings account.

The difference comes when market rates change, but this can be a double-edged sword. A term deposit might look great if market rates are dropping, but not so hot if they’re rising and your savings are being left behind. A savings account is the opposite - you might be worried when rates start to drop, but rising market rates are great news.

The important thing for either product is to compare interest rates before you go ahead, to be sure you’re getting the best deal on the market.

Things to consider when choosing between a term deposit and a savings account

So now you’ve seen how term deposits and savings accounts compare - but is there anything else to consider? Of course there is. Some things can’t be summed up with a simple side-by-side comparison, but instead come down to how you use your money.

So make sure you keep these things in mind when deciding where to stash your hard earned cash:

  • Your budget - ask yourself if you’ll need to make withdrawals from that lump sum any time soon. If the money you’re thinking of putting in a term deposit is part of your monthly budget, it might be better off in a savings account. Crunch the numbers with our budget calculator to work out how much wiggle room your budget will give you.
  • Saving goals - are you saving for a big spend in six months, or in five years? Or maybe you’re just trying to set up an ongoing savings plan. Your savings goal will not only affect whether you opt for a savings account or term deposit, but also what kind of term deposit might be best for you.
  • Saving habits - are you someone who makes regular deposits to your savings? If you are (hint: you should be) then make sure you have the option to do so. Or maybe you’re not that great at saving and locking your money away could be just the thing you need to stop spending. Be honest about your saving habits, good or bad, and choose the product that will suit them best.

Find a term deposit

Ding-ding, we have a winner! But once you’ve decided a term deposit is for you, what's the best way to go about finding one? First things first, head over to our term deposit comparison page to see some of the best deals available today. Then, if you want to see offers tailored to your needs, take our term deposit search tool for a whirl. All you have to do is put in your deposit amount, term and location to get personalised results.

Find a savings account

Or if a savings account has won you over, then stop by our savings account guides to make sure you’ve done all the necessary research, then head over to the savings account comparison page to see some of the best offers on the market.

Compare today's top term deposits