Term deposits are a safe, low-risk financial product. Unlike most investments, you can't lose money. And unlike a savings account, your rate won't go down if rates change.
With a term deposit, you lock up the money with your bank at a fixed rate, for a fixed period. At the end of the term deposit your investment matures and you receive the original deposit plus the interest you've earned.
Your return is fixed and guaranteed, unlike with an investment property or investing in the stock market.
The only way you could theoretically lose money with a term deposit is if the bank collapsed. And bank accounts, savings accounts and term deposits are protected by the Australian government's Financial Claims Scheme.
Under the FCS, any money you deposit with a bank is protected, up to a total value of $250,000 per person, per bank.
Organisations protected under the FCS must be authorised deposit-taking institutions (ADIs). Any bank, including building societies and credit unions, will almost certainly be an ADI, but you can check via APRA's ADI register.
Most Australians who open a term deposit do so to earn a guaranteed return.
| Response | |
|---|---|
| Get a guaranteed/risk-free return | 36.36% |
| Meet a savings goal | 30.45% |
| Diversify investment portfolio | 15% |
| Prevent spending | 13.64% |
| Other | 4.55% |
Term deposits are basically risk-free. But you need to understand how they work and their drawbacks.
Any financial product represents a risk if it's not suitable for your specific needs.
Unlike a savings account, with a term deposit you put the money away and forget about it.
But what if you signed up for a 12-month term deposit and then, 6 months in, you suddenly need the cash?
Banks let you withdraw money from a term deposit before maturity. But:
In an emergency you can access money in a savings account much faster than in a term deposit.
You could get a higher return (with higher risk) by investing the money. Sometimes even high interest savings accounts have slightly higher rates.
Your term deposit rate won't change. This means it won't go down. But in a period of rising rates you can miss out on better returns.
Let's say you locked in a 3% term deposit for 24 months and then rates started rising. Now your bank is advertising a term deposit rate of 5%. You would miss out on a higher return.
Unless you specify otherwise, many banks automatically roll over a matured term deposit into a new term deposit.
Your bank should notify you close to the term deposit's maturity date. If you don't want the account to roll over, make sure you tell your bank beforehand.
Lock in a fixed rate on a range of term lengths between 3 months and 3 years for deposits $1000 or more.
Earn a competitive interest rate on terms between 1 month and 2 years with a Heartland Bank term deposit.
When can you expect term deposit interest rates to increase? Find out in this handy guide.
When your term deposit matures it's time to decide the next move for your money. Here are your options, including term deposit rollover (tdr).
Want to withdraw money from your term deposit before it matures? Penalties apply, so check out this guide to term deposit penalties and how they will affect you.
Term deposits with loyalty bonuses reward customers for their ongoing business by offering a bonus interest rate on term deposit balances.
Set your own terms and conditions for how your money grows with a flexible investment account that rewards you with higher interest earnings.
If you trying to decide on the best time to invest in a term deposit, start here. See the past interest rates on term deposits from 1985 until now.
If you need a safe place to tuck your savings of away and yield a profit, a $100,000 term deposit could provide a solution.
The added level of control coupled with the high interest earning potential of notice savers makes this a savings account worth considering. Ensure that you understand exactly how it works, and if it will fit in with your financial goals before making a final decision.
HI there ,are term deposits the safest way the save? Can anybody hack in a term deposit account and commit fraud.
Kind Regards
marcel
Hi Marcel,
Term deposits are one of the safest ways to invest. Your deposit up to $250k in an Australian bank term deposit is protected by the government bank guarantee scheme.
Like with any account you have, you need to keep your account information secure and not share passwords or log in details with anyone.
Thanks,
Alison
How much does the Government Backed Guarantee cover?
If I had more than that amount to invest, would that guarantee cover a second investment as well?
Hi Cinderella,
Thank you for reaching out to us.
The covered amount of the Government Guaranteed Scheme is $250,000 for every account-holder and every Authorised Deposit-taking Institutions (ADIs). If you have separate accounts with different protected institutions with less than $250,000 deposits, you will be covered for both accounts. In case you have $250,000 with two different “brands” but they’re operated under the same bank, you’ll only get $250,000 in total.
You won’t be covered by the deposit amount over $250,000. You can learn more about the Australian Government Guarantee Scheme.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
If a married couple have a savings account with a balance of $600,000, is the government guarantee an amount of $250,000 EACH or $250,000 in total
Hi Garry,
Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.
The Australian Government guarantees deposits up to $250,000 in Authorised Deposit-taking Institutions (ADIs) such as banks, building societies or credit unions. This means that this money is guaranteed if the institution collapses. This cap applies per person and per ADI. You may refer to this page for more information https://www.finder.com.au/bank-protect-money.
I hope this helps.
Cheers,
Danielle
Hi
If I have invested in 2 term deposit with 2 different banks are both accounts protected up to the $250000 govt guarantee per acct or is it only the one
Hi Carmen,
Thank you for your inquiry.
The $250,000 cap applies per person and per ADI (such as your bank, building society or credit union). If you have $250,000 deposit with one ADI and $250,000 with another, then both of your deposits are guaranteed. However, if you have multiple deposit accounts with “brands” that are owned by the same ADI (bank), the guarantee will only apply to $250,000 of these funds in total.
So to make sure how much you’ll be guaranteed for, I would suggest that you check the ADI you bank with your two deposit accounts if they are one company or not.
Hope this helps.
Cheers,
May