Fact checked
Term deposits are a trusted way to stash your spare cash and earn the highest rate of interest. However, not all term deposits offer the best interest rates, so it’s important to compare your various options on the market to find one that offers the best deal for your savings.
Savvy can help you compare a range of offers from institutions around the country so you can find the best high interest term deposit available and stash your savings with confidence.
Term deposits are a way of locking away your savings for a set period in return for earning high interest. The longer you agree to lock away your savings, the higher the interest rate you can expect to earn. The best high interest term deposit rates are offered for deposits spanning multiple years.
The most important way to compare term deposits is in terms of their interest rate. This will determine how much of a return you’ll receive on your savings over the term of your deposit, so it’s crucial to compare to find the best rate. Even relatively small differences in the interest rate can make a big difference to your earnings. The table below demonstrates this for a $25,000, three-year term deposit with interest paid monthly:
| Deposit | Term | Interest rate | Interest earned | Total saving |
|---|---|---|---|---|
|
$25,000 |
Three years |
1.00% p.a. |
$750 |
N/A |
|
$25,000 |
Three years |
1.75% p.a. |
$1,312 |
$562 |
|
$25,000 |
Three years |
2.50% p.a. |
$1,875 |
$1,125 |
*Interest isn’t necessarily reflective of current market rates.
Some of the other key ways to compare term deposits include:
You can compare term deposits across all the most important areas to you right here with Savvy. Take advantage of the information at your fingertips.
The interest offered on term deposits is influenced by the official RBA cash rate, as are almost all interest rates in Australia. The higher the cash rate, the higher the fixed rate is likely to be. The interest rate offered on term deposits will also increase the longer you agree to lock up your funds. This is because your financial institution will receive a better rate of interest on the international money market for a longer period of certainty (having your funds available to use for other purposes).
Choosing to have your interest paid annually or at maturity will also earn you a slightly higher interest rate to compensate for the lack of compounding in your account. By paying interest monthly, your account will grow more quickly due to the effect of compounding, so you may earn more interest overall. This is why banks pay a slightly higher rate to receive your interest annually or at the end of your deposit period. The below table demonstrates the difference in interest on a $10,000 deposit for two years when adjusting its interest frequency.
| Amount and interest rate | Interest paid frequency | Total interest earned |
|---|---|---|
|
$10,000 at 3.65% p.a. |
Monthly |
$756.11 |
|
$10,000 at 3.65% p.a. |
Quarterly |
$753.74 |
|
$10,000 at 3.65% p.a. |
Half-yearly |
$750.23 |
|
$10,000 at 3.65% p.a. |
Annually |
$743.32 |
|
$10,000 at 3.70% p.a. |
Annually |
$753.69 |
The table above shows how you’ll earn slightly more interest overall if your interest is paid back into your account monthly. This also demonstrates that if you want to find the best deal for your money, it’s necessary to compare not only those accounts which offer the highest interest rates in Australia but also to look at other factors such as interest payment frequency, to ensure you get the very best deal.
Other factors to consider
Bonus interest
Some financial institutions offer a bonus interest rate if you roll your funds into another term deposit, so these special offers are worth comparing too. For example, you may be offered a 0.2% p.a. increase in interest rate if you roll your funds over for a second term.
Penalties for early withdrawal
It’s important to look at the penalties charged if you have to terminate a term deposit early and how much interest you’ll lose if you do this. Set penalty fees range from $30 to more than $50. In addition to charging the penalty fee, some institutions also dock the interest earned if you want to withdraw your funds early. The amount of interest reduction can depend on how early you withdraw your funds; for example, a 50% early withdrawal can result in a 50% reduction in interest paid.
No – you’ll generally be offered a higher rate on a term deposit than you would with a savings account. However, this does depend on you comparing the interest rate on both types of accounts to make sure you get the best rate available. There are many similarities between high interest savings accounts and term deposits, but there are major differences too. Both offer a very safe and risk-free way to deposit your savings and earn high interest on them.
With a high-interest savings account, you’re free to deposit and withdraw money as you wish, but with a term deposit, you’re locked into depositing a set sum of money, and can’t add to that sum once the initial deposit has been made. A savings account also allows you access to your funds at all times, which most term deposits don’t (without giving your bank 31 days' notice, or in exceptional circumstances such as financial hardship.)
Savings accounts also typically have a variable interest rate, meaning the rate can change at any time, whereas term deposits come with a fixed rate.
The best high interest term deposits in Australia are generally offered by smaller and online banks. This is because they have fewer overheads than the major banks, which have to maintain branches all over Australia and pass on a portion of their profits to shareholders. As of June 2022, the best high interest term deposit accounts are offered by AMP Bank, Judo Bank, MyLife Finance and Macquarie Bank.
Current maximum term deposit interest rates for a $5,000 deposit
| Institution | Six-month term deposit | One-year term deposit | Two-year term deposit | Three-year term deposit | Five-year term deposit |
|---|---|---|---|---|---|
|
AMP Bank |
1.85% p.a. |
2.85% p.a. |
3.60% p.a. |
3.85% p.a. |
4.10% p.a. |
|
Judo Bank |
1.85% p.a. |
2.70% p.a. |
3.40% p.a. |
3.45% p.a. |
4.00% p.a. |
|
MyLife Finance* |
1.95% p.a. |
2.75% p.a. |
3.00% p.a. |
3.35% p.a. |
3.75% p.a. |
|
Macquarie Bank |
1.90% p.a. |
2.75% p.a. |
3.30% p.a. |
3.35% p.a. |
3.50% p.a. |
*Soon to be known as Challenger.
As interest rates are on the increase in Australia in 2022, it’s important to compare interest rates with Savvy to make sure you find the best possible deal. By comparing a range of options, you can select the one with the highest rate with more confidence.
You won't have to pay a cent to compare term deposits with us, with free comparisons available 24/7.
There's no need for you to worry about visiting any banks, as you can compare term deposits and open one online.
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Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
