Term deposits vs high interest savings accounts

Financial security is crucial

No matter whether it’s business or personal, or what kind of work you do, knowing your money is secure and, at the very least, earning a little interest, is an essential part of financial planning.

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High interest savings accounts and term deposits are two of the main places to store your money, but which option is best? There are a number of factors and features that need to be considered when deciding what is right for you.

High interest savings account or term deposit

A high interest savings account is a bank account designed to help your savings grow faster. Generally, it offers a higher interest rate compared to other transaction accounts. Whereas a term deposit is a savings product where your money is invested for a fixed term at a fixed interest rate.

Choosing between these two alternatives will largely depend on your circumstances and your cash flow needs. 

The interest rate

Generally, the interest rates offered on a high interest savings account is a standard variable rate, so your rate is not fixed and can move with the market or be vulnerable to changes made by the banks. On the plus side, the interest rate is a competitive one and usually higher than that offered by a traditional transaction account—helping you build your savings faster. However, some high interest savings accounts pay a bonus rate above the standard variable rate as a reward for a particular behaviour, such as depositing a certain amount each month and/or not making any withdrawals. It is important to pay particular attention to these bonus rate conditions as not meeting the behaviour could result in just the standard variable rate being paid which is usually very low. 

With term deposits, your interest rate is locked, so even if the market dips, your rate remains the same and you have certainty around how much you will receive at the maturity of your term deposit. Generally speaking the longer the term you can lock in for, the higher the interest rate you will receive. 

The term

For high interest savings accounts, you can keep your money in there for as long as you like. There is no fixed term or maturity date, so you never have to move your money if you’re happy with your terms and conditions. Some high interest savings accounts have a ‘honeymoon rate’ or introductory rate which is usually 3 or 4 months from opening your account after which point the rate on the account will drop back to the standard variable rate. 

However, when it comes to term deposits, you’ll need to decide on the length of investment time. This can be anywhere from one month to five years. A short-term deposit is one that is 12 months or less. A long-term deposit is anything longer than one year. 

The fees

Of course, as with anything, there are fees to consider. While many high interest savings accounts don’t have fees (remember, the point is to save your cash, not spend it setting up accounts), some banks do charge for set-up, monthly ongoing or annual fees so do your research. 

Similarly, for term deposits, there are generally no fees attached unless you decide to withdraw any funds before the term is finished.

Accessing your money

Your high interest savings account is open and accessible to you at all times. This means you can withdraw your money if and when you need it. But remember, the amount of interest you earn is dependent on the amount of money in there. Plus, many accounts offer bonus interest rates if you don’t withdraw so it’s wise to keep that in mind. 

With term deposits, you cannot access your money at all until the term is up. If you do decide to break your term deposit early, this is where penalties will arise. 

Additional deposits

As your high interest savings account is open and accessible, you can add to your savings at any time. The more money in the account, the more interest you earn, so it’s beneficial to keep adding to it. Also, some accounts will require a certain amount to be deposited each month in order to qualify for a bonus interest rate so you will really see your savings grow. 

Comparatively, for term deposits, you cannot make any additional deposits. The only way to add money is to wait for the term to mature and then deposit your additional savings into a new term deposit. 


Choosing where to store your cash is fundamentally a personal decision. Which option works best for you and your circumstances? 


Want to learn more about your different options for managing money? Find out about our range of transaction accounts. Looking for a dependable yield from your income or savings? Learn about our fixed term deposits. Ready to take the next step? Contact us to find out how we can tailor a finance solution for you, or call us on 1300 131 141.

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      The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided.