Term Deposit vs Savings Account: Which Is Better?

Both options let you earn interest on cash you're not spending. But they work very differently — and choosing the wrong one can cost you a meaningful amount of interest, or lock you out of money you need. Here's a plain-language comparison.

The core difference

A savings account is flexible. You can deposit and withdraw whenever you like, and the interest rate is variable — meaning the bank can change it at any time.

A term deposit locks your money away for a fixed period — typically 1 to 36 months — at a rate that's guaranteed for the full term. You agree to the rate upfront, and the bank can't change it while your money is locked in.

Rates right now

As of March 2026, the best savings account bonus rates sit around 5.00–5.35% p.a. — but most of those come with conditions: you may need to deposit a minimum amount each month, make a set number of card transactions, or grow your balance every month. Miss the conditions and you drop to a much lower base rate, sometimes as low as 0.05%.

Term deposit rates are currently competitive. You can lock in 4.80–5.10% p.a. for 12 months across several lenders with no conditions attached. Compare current term deposit rates →

When a term deposit is the better choice

You have a lump sum you won't need to touch. If you've sold a property, received an inheritance, or have cash sitting idle that you know you won't need for 6–24 months, a term deposit is almost always the better option. You get a guaranteed rate, no hoops to jump through, and no risk of the bank cutting your rate mid-term.

You want certainty. Savings account rates are variable. The RBA can cut the cash rate — and banks typically pass those cuts through quickly on savings accounts while being slower to pass on hikes. A term deposit immunises you from that for the duration.

You want to remove temptation. If your savings are easily accessible, they're easier to spend. Locking money into a term deposit creates a natural barrier.

You have more than $250,000 to deposit. Government deposit protection covers up to $250,000 per person per bank. If you have more, splitting across multiple term deposits at different banks is a clean, structured way to stay protected.

When a savings account is the better choice

You might need the money. Term deposits charge break fees if you withdraw early — typically a reduction in your interest rate, sometimes significant. If there's any chance you'll need access, a savings account wins on flexibility alone.

You're still building your balance. Savings accounts reward regular deposits. If you're adding to your balance every month, a bonus savings account is structured exactly for that. Term deposits are designed for lump sums, not regular contributions.

Your balance is modest. Many term deposits have a minimum deposit of $1,000–$5,000. If you're below that, a savings account is your only real option.

The hidden risk with savings account bonus rates

The headline rates on savings accounts — 5.25%, 5.35% — look competitive on paper. But most Australians don't earn those rates in practice. Miss one condition in a month (forgot to make 5 card transactions, didn't grow your balance by $1) and you earn the base rate instead. On $100,000, the difference between a 5.25% bonus rate and a 0.55% base rate is around $390 for a single month. That adds up.

A term deposit rate is the rate you get. Full stop.

Our recommendation

For money you won't need for at least 6 months: use a term deposit. The rate is guaranteed, no conditions required, and current term deposit rates are competitive with the best savings accounts once you account for the realistic probability of missing bonus conditions.

Keep a separate savings account for your emergency fund and any money you might genuinely need access to. Use it as your working buffer. Park everything else in a term deposit.

If you're unsure which lenders offer the best rates for your preferred term length, compare current Australian term deposit rates on RatePulse. You can also set up a free rate alert — we'll notify you if a lender changes their rate on the term you care about.