Savings accounts offer slightly higher rates, but you have to work a bit harder to get them. Term deposits are dead simple: put the money there, forget about it, earn interest.
A term deposit involves locking up a sum of money for a term (usually for a few months or 1-2 years) and earning a fixed interest rate.
With a savings account you earn interest on your savings balance. But the highest interest rates require you to meet certain conditions, like depositing $500 each month.
A savings account is good if you're trying to build up your savings with regular deposits. A term deposit is useful if you already have some money and want to earn interest on it.
Savings accounts vs term deposits: What's the difference?
Savings accounts
You get a variable interest rate. It can change at any time, either up if rates are increasing, or down if rates start to fall.
You have to work harder to get a high rate. The highest savings rates on the market make you jump through a few hoops to get the max rate. This includes depositing a certain amount each month, or making no withdrawals.
Your savings are easily accessible. A savings account is not for daily spending, and you might lose out on bonus interest if you withdraw your savings. But they're not locked away, providing you access in an emergency.
Your rate is fixed. Whatever your rate is at the start of the term, it won't change until the term ends. It won't go down. But it won't go up either.
Set and forget. There are no conditions to meet with a term deposit. Just put the money there and forget about it until the term matures (comes to an end).
Harder to access your money. Some banks require a month's notice before you can pull money out of a term deposit. Other banks will give you your money faster, but you won't get any interest. A term deposit is really for saving money you don't need to access any time soon.
How do rates rise or fall? It depends on financial markets and regular decisions made by the Reserve Bank.
What's right for me: savings account or term deposit?
Here are some simple examples of different customers who could benefit from a term deposit or a savings account (keep in mind your own situation will be different and these are just examples).
I have a decent amount saved already and I don't want to worry about meeting bonus conditions or adding to my balance
A term deposit is great for people who aren't trying to grow their savings and want to earn interest in the simplest way possible.
I don't have much in the way of savings and I want to build my savings up each month
If you've got a job with regular income and you haven't got much money saved, you want a high interest savings account. You can put money in it each month to meet any deposit requirements and leave it there earning interest at a high rate.
I just want the highest possible interest rate
A high interest savings account will typically have a slightly higher interest rate, so look at these. But make sure you can meet the bonus rate requirements to maximise your interest.
I have some money saved but I may need to use it suddenly
A savings account will offer more flexibility here. It's very easy to move money out of a savings account.
You could consider a term deposit but check the account's conditions about early withdrawal. You may have to give 31 days' notice before getting your money.
Simple versus compound interest
Term deposits offer simple interest, while savings accounts use compound interest. You earn more interest when it compounds.
Simple interest. You deposit $30,000 for 24 months at a 4.00% rate. You earn $2,400 in interest, which is calculated once, base on the total amount deposited.
Compound interest. You deposit $30,000 for 24 months at 4.00% interest rate, compounded monthly. Every month the interest from the previous month is added to the deposited amount, earning slightly more interest. This happens every month. In 24 months you earn $2,494 in interest.
This means you can earn more interest with a savings account. However, it's hard to make an apples to apples comparison. Most savings accounts are for people who are adding money each month. A term deposit is better suited to someone who already has a chunk of savings and wants to earn interest in the easiest (or simplest) way possible.
Frequently asked questions
Savings accounts typically offer higher interest rates than term deposits, but this is because you have to meet some monthly account conditions. So while the rate is higher, it's a bit more work to get it.
Yes, you can have both a savings account and a term deposit at the same time. You might want to do this if you want to invest a portion of your money away for a fixed period, but keep some of your money in a savings account that's easy to access if you need it for emergencies or unplanned expenses.
Yes, banks are required to withhold tax on your interest earnings for both a savings account and a term deposit. The amount of tax depends on your overall income for the financial year.
Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio
Richard's expertise
Richard has written 603 Finder guides across topics including:
Alison is an editor at Finder and a personal finance journalist with over 10 years of experience, having contributed to major financial institutions and publications such as Westpac, Money Magazine, and Yahoo Finance. She is frequently quoted in media outlets like SmartCompany and SBS, offering expert insights on superannuation and money management. Alison holds a Bachelor of Communications in Public Relations and Journalism from the University of Newcastle, and has earned three ASIC RG146 certifications in superannuation, securities and managed investments and general financial advice, ensuring her expertise is fully aligned with ASIC standards. See full bio
Alison's expertise
Alison has written 640 Finder guides across topics including:
Looking for the best bank in Australia? Let's take a look at the bank accounts offered by the big banks and see how they stack up against others in the market.
See some of the best savings accounts in Australia right now with high interest rates and no fees, plus tips to help you find the best savings account for you.
The ING Savings Maximiser is a high interest savings account with a competitive interest rate when you meet the account conditions. Here's how to earn the top bonus rate with this account.
Our range of simple calculators can help you plan your finances and compare potential interest earned.
Important information about this website
Finder makes money from featured partners, but editorial opinions are our own.
Finder is one of Australia's leading comparison websites. We are committed to our readers and stand by our editorial principles.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
