What happens to your term deposit if your bank closes?

A piggy bank with a 'closed' sign in front of it

Term deposits are covered under the government’s Financial Claims Scheme (FCS), but what about the interest you’ve been patiently trying to accrue?

Say you’re on month 5 of a 6 month term deposit, but the bank announces it will close before your term reaches maturity. Will you get a percentage of your interest paid out when the bank shuts off the lights? Or are you left out in the cold, without a dime for your time?

Well, the answer is… it depends. 

The way banks treat term deposit breaks – for any reason, including if your bank closes its doors – can usually be found in their terms and conditions. 

A recent, real-world example of this sort of situation coming to pass is with the recently closed Volt Bank

Chief executive of Volt Bank, Steve Weston told Mozo, “In our case we paid accrued interest up until the date we broke the term deposit.

“As market rates had increased, customers benefited from us breaking as they could reinvest at the higher deposit rates on offer.”

How likely is it that a bank will close?

For starters, it’s pretty unlikely that an established Australian bank would fail or go bankrupt. Plus, if they did, you'd still be protected by the FCS up to $250,000 per person, per ADI (bank, credit union or building society).  

But as we’ve seen in recent years, it’s the smaller ADIs, like neobanks Volt and Xinja, that appear more likely to shut down.

Is there more risk investing with smaller banks vs the Big Four?

That’s not to say that depositing your money with the smaller guys is too fraught with risk to be worthwhile. No, in fact the average term deposit rate in the Mozo database for the Big Four banks is 1.71% p.a. Compare that with the average term deposit rate across all offerings in our database – 2.36% p.a. –  and rates are significantly higher as you step outside the bounds of the major players.

Typically, a higher interest rate for savings products comes from a bank or ADI having less overhead – that is, physical branches populated with staff, as opposed to online-only support. Naturally, there are pros and cons for either of these, so be sure to look at term deposit reviews from our customers to get the bigger picture.

In the meantime, have a look at the sorts of term deposits that are available right here, right now.

Term deposit comparisons on Mozo - last updated 11 August 2022

Search promoted term deposits below or do a full Mozo database search . Advertiser disclosure
  • Mozo Expert Choice Badge
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.25% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Competitive rates for one year term deposits. Start investing with as little as $5,000 to $1,000,000. For personal customers who want to invest above $500,000, or for non-personal customers, contact Challenger’s call centre to discuss account application options.

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  • Hot Deal Earn a competitive rate of 3.24% half yearly or 3.25% annually on an 18 month term
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.10% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Deposit of $5,000 up to $5 million. Choose a term from 1 month to 5 years. Select a range of convenient interest payment options. $0 establishment or ongoing fees. Easy tracking using the mobile banking app.

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  • Mozo Expert Choice Badge
    Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.25% p.a.
    1 year
    $1,000
    Yes up to $250,000

    Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly (Terms and Conditions apply)

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  • Mozo Expert Choice Badge
    Online Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.35% p.a.
    2 years
    $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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  • Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.30% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Competitive interest rates available. Terms ranging from 1 month to 5 years. No account fees to be paid. Interest can be paid to another account. Option to choose when interest is paid. Minimum deposit of $5,000 required.

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  • Boost Saver Account with The Lock Saver Feature
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    2.60% p.a.
    1 month
    $0
    Yes up to $250,000

    Get all the perks of a term deposit but even more flexibility with the Virgin Money Boost Saver. Get up to 2.6%* variable interest when you switch on the Lock Saver Feature to lock your hard-earned savings away. Add money at any time, pay $0 fees and get access to your money with just 32 days’ notice*. Comes bundled with the everyday Virgin Money Go Account. (*Monthly criteria, T&Cs apply)

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  • Mozo Expert Choice Badge
    Online Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.05% 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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  • Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    2.70% p.a.
    6 months
    $5,000
    Yes up to $250,000

    Competitive interest rates available. Terms ranging from 1 month to 5 years. No account fees to be paid. Interest can be paid to another account. Option to choose when interest is paid. Minimum deposit of $5,000 required.

    Details
  • Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    3.30% p.a.
    1 year
    $10,000
    Yes up to $250,000

    $0 Set up and no ongoing account-keeping fees. Interest rate depends on balance amount. Optional 3,6,9 or 12 month terms. Balances from $10,000.

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