The question of whether a term deposit or a high-interest savings account earns more is not purely about the headline rate. It depends on whether you will consistently meet the savings account's monthly conditions, whether you need access to your money during the period, and where interest rates are heading over your time horizon. Both are APRA-regulated deposit products protected by the Financial Claims Scheme up to $250,000 per ADI.
| Feature | Term deposit | High-interest savings account |
|---|---|---|
| Rate type | Fixed for the full term | Variable — can change any time |
| Conditions to earn top rate | None (rate guaranteed on opening) | Monthly deposit and/or no withdrawal conditions |
| Access to funds | Restricted — 31-day notice or break penalty to access early | Full access (though withdrawals may forfeit the bonus rate) |
| Rate risk | None during term — locked in | Lender can reduce rate at any time with notice |
| Automatic rollover | Usually rolls over at maturity unless you instruct otherwise | Not applicable |
| Minimum balance | Typically $1,000–$5,000 | Often $0, some have minimums for bonus rate |
The RBA cut the cash rate to 4.10% in February 2026, with further cuts expected later in 2026. This has begun pushing savings rates lower. The best 12-month term deposit rates currently sit at approximately 4.90–5.20% for amounts above $10,000. The best ongoing savings account rates (conditional) are 5.50–5.90%, with the highest rates concentrated in non-bank ADIs. Introductory rates of up to 5.90% are available on some savings accounts but apply only for the first 3–5 months.
On current rates, a savings account earns more than a term deposit — but only if you reliably meet the monthly conditions. If you miss the conditions in three months out of twelve, the effective yield on an account offering 5.75% conditional (1.00% base) drops significantly. Missing conditions in three months on a $50,000 balance costs approximately $570 in foregone interest compared to a term deposit at 5.00%.
In a declining interest rate environment — which Australia entered in 2026 — locking in a term deposit rate hedges against further rate cuts. If the RBA cuts by another 50 basis points during your 12-month term deposit, your locked-in rate stays fixed while savings account rates (which are variable) fall. The value of this hedge depends on the size and timing of expected rate cuts, which are inherently uncertain.
If you believe rates will fall significantly over the next 12 months, a term deposit locks in today's rate and may outperform a savings account whose rate follows the RBA down. If you believe rates will stay flat or rise, a variable savings account keeps you positioned to benefit. Market consensus as at mid-2026 is for 1–2 further 25bp cuts in the second half of 2026, though this could easily be wrong.
Most term deposits automatically roll over at maturity unless you provide written instructions to the contrary. The rollover rate is typically the lender's current rate for that term on the date of maturity — which may be lower than your original rate if rates have fallen. Automatic rollovers at below-market rates are a known consumer harm in the deposit market. ASIC has flagged this as an area of concern. Set a calendar reminder before your term deposit matures and actively compare rates rather than accepting the rollover rate.
A term deposit is the better choice if: you have a specific future use for the money (property settlement, tax bill, major purchase), you are not confident you will consistently meet monthly savings account conditions, you want rate certainty over a declining rate environment, or the funds are from a windfall (inheritance, property sale) that you genuinely will not touch.
A savings account is better if: you need access to the funds during the period, you are accumulating money through regular deposits (a savings account is easier to add to), you are confident you will meet the conditions every month, or you want the flexibility to shift providers if a better rate emerges.
A practical approach for large balances: split the amount. Put a portion in a term deposit to lock in a guaranteed return on funds you genuinely will not need. Keep the remainder in a high-rate savings account for access and to benefit if rates do not fall as much as expected.
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