Are term deposits worth it?

A fixed rate for a fixed period. The interest can be estimated to the cent before you start, and eligible deposits at an Australian-incorporated ADI are covered by the Financial Claims Scheme up to $250,000 per account holder per institution. Early withdrawal, fees and tax change what you actually receive, and amounts above the limit are not covered.

That combination suits money with a known date and no need for access in between. Money that may be needed at short notice is harder to reach in a term deposit than in a savings account, and a term deposit on its own is a way to hold value and earn a known income rather than to grow it quickly.

The headline rate is not what you keep. Interest is taxed as income at your marginal rate (see tax on interest), and prices rise. The ABS reported that the CPI rose 3.5% in the 12 months to July 2026 (released 26 August 2026); that is a historical figure, not a forecast of inflation over a new deposit’s term. On 10 Oct 2026 the highest comparable twelve-month rate in this snapshot was 5.60%, and the median of the 75 ranked brands publishing that term was 5.25%. After tax at an ordinary marginal rate, a rate near that median can sit below the last twelve months’ inflation, meaning the money buys slightly less at maturity than at the start even though the number is bigger.

The real return is the interest after tax, less inflation over the same period. Both the rate you accept and the tax you pay on it move that number.

A savings account pays a variable rate on money you can reach at any time, often with a bonus rate that depends on monthly conditions. A term deposit fixes the rate and restricts access. Which pays more over a given period depends on the starting rates, whether the bonus conditions are met, and how savings rates move in the meantime. See the comparison.

Shares and bonds can pay more over years and can also fall in price. A term deposit is not traded, so its value does not fluctuate, though inflation can reduce what the money buys and anything above the guarantee limit depends on the institution.

Compare the term you want rather than the headline. The highest rate at three months is often published by a different bank from the highest at twelve. In the snapshot read on 10 Oct 2026 the highest comparable rate was 5.25% for three months and 5.60% for twelve. Check the minimum deposit, when interest is paid, and what the product does at maturity. A ladder spreads the maturity dates.