A term deposit is one of the simplest fixed-income products. You lock away a sum of money for a fixed period — the term — at a fixed interest rate agreed up front.
The basics
- You choose a term, usually from 1 month to 5 years.
- The rate is fixed for the whole term, so your return is known on day one.
- At the end (maturity) you get your money back plus interest.
Why people use them
Term deposits suit savers who want certainty and don't need access to the money during the term. Because the rate can't change, you're protected if interest rates fall — though you also miss out if they rise.
The catch
Your money is locked in. Most banks let you break a term deposit early, but you'll usually need to give notice (often 31 days) and accept a reduced interest rate as a penalty.
Is my money safe?
Deposits with Australian banks, building societies and credit unions are protected by the government's Financial Claims Scheme up to $250,000 per person, per institution.