A term deposit is a bank account that locks a fixed sum away for an agreed period at a fixed interest rate. The rate is set when the deposit is opened and does not move with the market; withdrawing early usually reduces the interest paid and requires notice.
The defining trade is certainty for access. The rate agreed at opening holds for the whole term regardless of what the cash rate does afterwards, which works in the depositor’s favour when market rates fall and against it when they rise. At maturity the money is released, and many banks roll it into a new term automatically unless instructed otherwise.
Early access is restricted by design. Australian banks generally require advance notice to break a term deposit and apply an interest reduction for doing so, details that sit in the product’s terms. Deposits at Australian banks, credit unions and building societies are covered by the Australian Government’s Financial Claims Scheme up to the scheme’s per-person, per-institution cap.
One nominal rate produces two totals, depending on when the interest is handed over. Suppose $50,000 placed for three years at 4.00 per cent, all three figures supposed. Paid out annually, each year's interest is $50,000 times 0.04, or $2,000, and the three payments come to $6,000. Left inside the deposit to compound, where the terms provide for it, the second year is worked on $52,000 and pays $2,080, and the third on $54,080 and pays $2,163.20. Those three add to $6,243.20, for a maturity balance of $56,243.20. The $243.20 between the two totals is what ASIC's Moneysmart describes as earning interest on the interest already earned: 12.49 per cent across the three years against 12.00 per cent for the money that was taken out along the way.
This page defines the product; average advertised term-deposit rates across terms live on Tradergy’s term-deposits page, presented as neutral reference tables, and the term-deposit calculator works the arithmetic for any amount, rate and term.
Longer read: How term deposits work in Australia. What a term deposit is, how interest is calculated and paid, what happens if you break one early, and how the government guarantee applies. No product picks.
For the live side of this definition, head to the term-deposit rate tables.
Related terms
Cash rate · Bond yield · Comparison rate · All terms
Primary authority: Moneysmart: term deposits. Definition reviewed against the authority’s published material; this page is reference information, not advice.
Common questions
What happens when a term deposit matures?
The principal and final interest are released, and the bank either pays the money out or rolls it into a new term, depending on the instruction given. Rollovers often default to the current advertised rate, which may differ from the original one.
Can I take money out of a term deposit early?
Usually only with advance notice, commonly 31 days, and with an interest reduction applied. The exact notice period and penalty are set out in each product’s terms and conditions rather than being uniform across banks.
Are term deposits government-guaranteed?
Deposits at banks, credit unions and building societies incorporated in Australia are covered by the Financial Claims Scheme up to its per-person, per-institution cap. The guarantee covers the deposit itself; the interest rate is a commercial matter for each institution.