Banks have cut interest rates for savers this year even though there was no change to the RBA rate. And term deposit rates have been hit hard – the best one-year term deposit now pays about 0.3% less than top online savings accounts.

Even worse, if you lock your savings away in a term deposit you won't benefit if rates go up again.

"The current RBA cash rate is a record low, so while there are no guarantees, it is very likely that within the next 12 months we will see rates start to increase again," explains Peter Marshall, Product Data Manager at

Roll over traps

To get top and bonus rates for savings accounts, customers often need to make minimum and ongoing deposits. Term deposits need less management, but they're far from set and forget:

  • The bank may automatically roll over the term deposit on maturity and your money is again locked away.
  • Rates vary for different terms and the roll-over rate may be worse than other rates for longer or even shorter terms.

An even bigger trap applies to CBA term deposit customers:

  • If you don't give the CBA instructions on maturity your term deposit will be rolled over in a "holding facility" paying only 0.75% interest for amounts up to $10,000 (1.5% for amounts between $10,000 to $99,000.)

Top term deposits

Top rates for a $25,000 term deposit.

Six months

One year

Three years

Source:, 24/11/2014

Term deposit tips

  • Small is good: Look beyond the big banks, as smaller providers may offer better rates.
  • Bank accounts: You may need an account with the institution to open a term deposit. There usually aren't any fees for the term deposits but there might be bank account keeping fees.
  • Early exit penalties: Penalties such as an administration fee and a rate cut apply if you want to break the deposit before the end of the term. Some term deposits offer penalty-free partial withdrawals.
  • Repayment: Some institutions repay the amount using a bank cheque; fees may apply to cash the cheque.