A term deposit is an agreement that you will keep a sum of money (the deposit) in a bank for an agreed length of time (the term), for which the bank will pay you interest.
This may sound a lot like a savings account, except a term deposit involves a fixed interest rate, so you can calculate the total interest you’ll earn on your deposit in advance. Also, term deposits often earn simple interest, rather than the compound interest that is more common in savings accounts. This means you’ll earn interest on your initial deposit, but you won’t earn interest on the interest you receive from your term deposit.
Generally, the longer the term, the more interest you may earn on your deposit, though this may vary depending on the interest rate you’re offered. It’s important to compare term deposits before committing and make some calculations to ensure you’re getting the best option to suit your needs.
If your term deposit reaches maturity (that is, gets to the end of the agreed term), you may have the choice to withdraw the cash from the bank, or “roll over” your deposit for another term.
You may want to compare term deposit options to make sure you’re rolling over to a term deposit with an interest rate that suits your needs - during the term, rates could have changed and you may find it’s worth switching term deposits before you automatically roll over.
