Best term deposit interest rates

Which Australian banks have the best term deposit rates?

Term deposit rates are changing a lot at the moment - and for the better. Here are some of the highest rates for January 2024:

3 month term deposits

BNK Bank Stow It Term Deposit Account - 4.95%

BCU 55+ Term Deposits - 4.9%

Judo Bank Term Deposit - 4.9%

6 month term deposits

Gateway Bank Term Deposit - 5.15%

Australian Military Bank Investment Plus - 5.15%

Australian Military Bank Teen Plus Term Deposit - 5.15%

Challenger Term Deposit - 5.25%

Community First Bank Term Deposit - 4.7%

Qudos Bank Term Deposits - $10,000+ - 5.2%

The Mutual Bank Term Deposit - 5.2%

State Bank of India Term Deposit - 5.1%

Community First Bank Term Deposit - $100,000+ - 5%

Is 2024 a good time to lock in a term deposit rate?

Now is the best time in years to lock in a term deposit rate. After a cycle of very rapid interest rate rises that began in 2022, Australians can now get term deposit rates above 5%.

The pace of rate hikes has slowed. Depending on inflation levels in 2024, we could see rates go even higher, though probably not by much. Finder's head of consumer research Graham Cooke said "While we expect the RBA could start cutting the cash rate late next year, we could see at least one more hike before that happens."

This could push term deposit rates even higher. But it's impossible to time the peak of any market. If you hold off on putting money in a term deposit to wait for a rate rise you're missing out on interest you could be earning right now.

Market update by Richard Whitten – Finder money editor

What is a term deposit?

A term deposit is a type of savings account that offers a fixed interest rate. But unlike a savings account you lock the deposit away until the term deposit matures (that is, the end of the term).

It's a low-risk way of earning a guaranteed, fixed return on your cash. You can choose a term deposit length from just 1 month long up to 5 years, and you'll earn a set interest rate for the duration of your term length.

Term deposit rates are typically a bit lower than what you can get with a high interest savings account. However unlike a savings account, term deposits don't require you to meet any monthly account conditions or ongoing deposit requirements to earn the rate.

How do term deposits work?

Term deposits are a big source of funding for banks. A bank takes your money, pays you a fixed rate of interest and then uses this money to fund loans or other activities.

Banks set their term deposit rates based on several factors, including:

• The official cash rate target. The Reserve Bank determines banks' short term borrowing costs. And this affects rates on term deposits.
• Market competition. Banks also consider what their competitors are doing when setting term deposit rates. Some banks want to encourage customers to save via term deposits, and so they make their rates more competitive.
• Maturity terms. Banks offer lower rates on shorter terms and higher rates on longer ones.

How to get the best term deposit interest rate

Here are a few ways to make sure you're getting a good rate:

• Consider smaller lenders, credit unions and digital banks. Don't just look at the Big Four.
• Compare term lengths: 6-month rates are often better than 3-month rates, and 24-month rates are often better again.
• Look for providers that offer extra interest as a loyalty bonus.
• Negotiate your rate with the bank to see if you can get a better deal.

How to compare term deposits

• Choose the right term length. You can put away your money for 3 months or several years. It depends on the rate you can get and when you need the money. If you're saving for a short-term goal like a holiday you may only need a 6-month term.
• Look for the highest interest rate. The higher the rate, the more you earn.
• Check the conditions for breaking the term deposit. In an emergency you may need to access your money fast. Some term deposits charge a fee for this, while others require a month's notice first.
• Look at how the term deposit pays interest. Some term deposits pay interest on a monthly basis, annually or at maturity (when the term ends). Getting interest paid at maturity often gets you a bigger interest payment.
• Watch out for automatic rollover. Some term deposits automatically roll over at the end of the term, meaning your money will be locked up for a new term. This is a handy feature if you want to keep building up interest with zero effort. But if you need to access the money make sure you notify the bank and don't let it roll over.

Pros and cons of term deposits

Term deposits are a very low-risk way to earn some interest on your savings. They're less attractive while rates are low. The biggest risk is that you can't easily access money saved in a term deposit in an emergency.

If you think you'll need to access cash in a hurry consider a savings account.

Interest rates have risen fast in the last 2 years, and the share market has been very volatile. This makes As well as increasing rates a term deposit one of the safest places for your cash. And you are protected by the government bank guarantee scheme for deposits of up to $250,000.

Alison Banney
Finder's banking editor

How do savings account rates compare to term deposit rates?

Like a term deposit, a savings account also allows you to earn interest on your money. But unlike a term deposit you can access the money in your savings account whenever you need.

You usually need to meet a monthly deposit condition to earn the full interest rate on your savings account, which can act as a good incentive to keep growing your balance and building your savings.

Savings account rates have been going up quickly over the past few months, with several accounts now offering 5% p.a. or higher.

ING Savings Maximiser

Go to site

5.5%
Max variable rate p.a.

0.55%
Base interest rate p.a.

$1,000
Minimum deposit

• Info
• Pros & cons

The ING Savings Maximiser is the best overall savings account. With this account you can earn an ongoing, variable rate of 5.5% p.a. if you deposit $1000 into a personal ING account (excluding Orange One and Living Super), make 5 eligible transactions and grow your nominated Savings Maximiser balance (excluding interest) each month. The total bonus interest rate is available on balances up to $100,000 on one Savings Maximiser account.

• Won Best Savings Account in 2023 Finder Awards
• Competitive ongoing bonus rate of 5.5% p.a. is one of the highest in market
• $0 Account keeping fees
• Fee-free ATMs in Australia and no international transaction fees with the linked transaction account (conditions apply)

• Several monthly conditions to meet to earn the bonus rate
• Bonus interest rate only applies up to balances of $100,000

Rewards program	N/A
Annual Fee	$0
Purchase Rate
Welcome offer
Interest-free period	Up to days on purchases
Balance transfer	N/A
Bonus points	N/A
Rewards points per $ spent	N/A
Foreign currency conversion fee

Macquarie Savings Account

More info

5.5%
Max variable rate p.a.

4.75%
Base interest rate p.a.

$0
Minimum deposit

• Info
• Pros & cons

Introductory rate of 5.5% p.a. for 4 months, reverting to a rate of 4.75% Available on balances up to $250,000.

• Introductory bonus interest rate is one of the highest in market
• No monthly account keeping fee
• No monthly deposit conditions to meet
• Make withdrawals and still earn interest
• Earn interest on balances up to $250,000

• Bonus interest only available for a introductory period

Rewards program	N/A
Annual Fee	$0
Purchase Rate
Welcome offer
Interest-free period	Up to days on purchases
Balance transfer	N/A
Bonus points	N/A
Rewards points per $ spent	N/A
Foreign currency conversion fee

AMP Saver Account

Go to site

5.4%
Max variable rate p.a.

1.2%
Base interest rate p.a.

$1,000
Minimum deposit

• Info
• Pros & cons

Earn an ongoing total bonus variable rate of up to 5.4% p.a. if you deposit $1,000 into an AMP Saver Account in the previous month. Available on balances up to $250,000.

• Competitive interest rate
• Small monthly deposit condition compared to other accounts
• Make withdrawals whenever you need to

• Bonus rate will only apply on $250,000 and revert to standard rate after that

Rewards program	N/A
Annual Fee	$0
Purchase Rate
Welcome offer
Interest-free period	Up to days on purchases
Balance transfer	N/A
Bonus points	N/A
Rewards points per $ spent	N/A
Foreign currency conversion fee

Term deposits vs high-interest savings: What's best for you?

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I was helping a family member compare savings options recently. They started looking at high interest savings accounts, then term deposits from the Big Four banks and some smaller banks with slightly higher rates. In the end they chose a term deposit from a big bank. The rate was slightly lower than the best in market, but they liked the convenience of the bank's app (they were already a customer). They had considered a high interest savings account too, but the bonus rate had a few conditions they weren't confident they'd meet each month.

— Richard Whitten, money editor

FAQ: More questions about term deposits

• Is a term deposit a good idea at the moment?

  Interest rates on term deposits have risen substantially since early 2022. The RBA has increased the interest rate regularly throughout 2022 and 2023.

  This means term deposit interest rates are higher than they have been in many years.

• How does the RBA cash rate affect my term deposit?

  The Reserve Bank of Australia's (RBA) cash rate is one of the factors that banks consider when setting their interest rates for deposit products. When banks increase their home loan rates, they often increase their savings and term deposit rates too. However, banks aren't required to do this.

• Can I have more than 1 term deposit?

  Yes, you can have more than 1 term deposit. There are a few reasons why you might want to do this. If you have a large deposit over $250,000, splitting your deposit up between more than 1 bank will ensure all your money is covered under the bank guarantee scheme. You might also choose to open a few different length term deposits for different short or long-term goals.

• Are there any fees for term deposits?

  Term deposits typically do no charge any set-up fees or account keeping fees. You may be required to pay a fee if you want to break your term deposit early, however instead of a fee this usually results in a reduction of interest.

• Do I need to pay tax on my term deposit?

  Yes. If you've invested money in a term deposit, you will need to pay tax on the interest you earn (the same goes for savings accounts). Interest is classified as another form of income, so the amount of tax you'll need to pay on your term deposit interest will depend on your overall taxable income.

• What happens if my bank changes the interest rate?

  Once you open a term deposit the interest rate is fixed for the life of the term. This means if your bank changes the interest rate, whether it increases or reduces, your rate will remain unchanged.

• Can I get a good term deposit rate for $100,000?

  If you've got a large balance of $100,000 or more, make sure you look for a term deposit that can be opened for larger balances. Some term deposits are only for smaller deposits of $10,000, $25,000 or $50,000 max.

  Here are a few of the best 12-month term deposit rates for balances over $100,000:

  • 5.15% p.a. with Judo Bank.
  • 5% p.a. with ING.
  • 5% p.a. with Bank of Sydney.

• How do I close my term deposit?

  If your term deposit has reached maturity, then you withdraw all the funds like with a regular bank account. However, if your term deposit is still maturing, then your bank will charge a penalty for withdrawing your funds early. To do this, you'll need to get in touch with your bank directly.

• I'm not an Australian resident. Can I open a term deposit?

  Most banks will require an Australian residential address to open a term deposit.

• What does it mean when your term deposit matures?

  When your term deposit matures or reaches maturity means the term length has come to an end. You can then choose to reinvest the money into a new term at the current term deposit rate offered by the bank or switch to a term deposit with a different bank. You can also withdraw the money and add it into a savings account, invest it or spend it - the choice is yours.

Looking for something else?

Business term deposits

Business term deposits provide fixed interest rates and the security of guaranteed returns. If you're looking for a safe place to invest some of your business funds, here are the current business term deposit rates on offer.

Long-term term deposits

A long term deposit rate can be anywhere from 12 months to five years. Generally longer term deposit lengths offer more competitive rates than terms of less than 12 months.

Kids term deposits

Looking for term deposits for your kids? Then check out the listed term deposits suited for children.

SMSF term deposits

An SMSF term deposit is a term deposit designed to help build your savings for retirement. They work in much the same way as normal term deposit accounts, however they're designed specifically for self-managed super funds.

Term deposit vs savings account calculator

Both savings accounts and term deposits allow you to earn interest on your money. To help you decide which account is right for you, use our term deposit vs savings calculator.