Compare One-Year Term Deposit Rates

What is a 12-month term deposit?

As the name suggests, a 12-month term deposit is a bank deposit that locks away your money for one year. This is the period of time known as the term. 

During this period, you generally won’t be able to touch the money you deposit. In exchange, you will earn a fixed rate of interest over the full 12 months.

For example, a 5.00% p.a. term deposit for 12 months would return $500 in interest if you deposited $10,000, assuming interest is paid at maturity.

Unlike a regular savings account, the interest rate is locked in when you open the term deposit, giving you certainty around your returns.

Bear in mind though that with 12-month term deposits, early withdrawals, meaning you take the funds out before the term ends, typically involve penalties or reduced interest. 

See also: Term deposits early withdrawal fees

What other ‘terms’ do term deposits come in?

Twelve-month term deposits are generally considered to be the upper end of short- to medium-term deposits. 

Short-term options typically range from:

• One month
• Three months
• Six months (often the most popular)
• Nine to 11 months

Anything longer is considered a long-term deposit, such as: 

• 18 months
• Two years
• Three years
• Four years
• Five years

What interest rate can you get with a 12-month term deposit?

In today’s market, 12-month term deposits are often considered a sweet spot for interest rates. While rates vary between banks, they are typically competitive relative to both shorter and longer terms. Though before, longer terms were known to have better returns. 

Essentially, it all comes down to what you're after. Do you want a shorter term deposit with a lower interest rate so you can access your funds sooner? Or are you looking for a longer option like a 12-month term deposit? 

In addition to the Big Four, other smaller banks and several building societies and credit unions in Australia offer 12-month term deposits, along with other terms. 

To start your search, compare products offering competitive rates, minimal conditions, and no ongoing or account keeping fees from leading Australian banks. 

When is interest paid on a 12-month term deposit?

When interest is paid on a 12-month term deposit typically depends on the provider and the structure of the product. 

In Australia, interest earnings from term deposits can be paid: 

• Monthly
• Quarterly
• Semi-annually
• Annually
• At maturity (end of term)

For 12-month terms, interest is typically paid at maturity, though some providers may offer monthly and quarterly payments as well.

1. Take note: Interest earned from term deposits is taxable income. 

Why should you pick a 12-month term deposit?

You might choose a 12-month term deposit if you want a balance between competitive returns and relatively short commitment. 

One year is short enough to avoid locking your money away for too long, but also long enough to secure a competitive fixed rate. 

Additionally, with a 12-month term deposit, you're less likely to fall to temptation to dip into your savings and break the term before its end date, which can incur hefty fees and interest deductions.

Bottom line, it can suit savers who want a relatively predictable return without committing for multiple years. 

See also: Can you live off term deposits?

Is your money in a 12-month term deposit safe?

Money parked in a term deposit held with Australian banks, credit unions, and building societies that are authorised deposit-taking institutions (ADIs) is covered by the government’s Financial Claims Scheme. This scheme protects deposits up to $250,000 per account holder per ADI in the unlikely event that the institution fails. 

12-month term deposits vs Savings accounts

Given the relatively long time that your money will be locked away with a 12-month term deposit (a lot can happen in a year!), a common question of some savers is whether to choose this or park their cash in a savings account instead.  

A 12-month term deposit offers a fixed rate for the full term, which can be beneficial if you’re able to lock in a high interest rate and you don’t want market fluctuations (e.g., rate cuts) to affect your interest earnings. However, this also means you could miss out on potential higher returns should interest rate increase during your term.

While the limited access of term deposits encourages disciplined saving, it can also be less than ideal should you need the money immediately, like in an emergency. 

Early withdrawals typically incur rate reduction depending on how much of your term has elapsed. Generally, the earlier you redeem, the bigger the reduction will be. You may also be required to provide at least 31 days’ notice to the bank. 

This is where savings accounts can be more ideal. 

Savings accounts typically allow flexible access to funds as they are often linked to everyday transaction accounts and allow deposits, transfers, and withdrawals. 

However, savings account interest rates are variable, meaning banks can adjust them in response to factors such as movements in the cash rate. This can work in your favour in a rising rate environment, but not when rates are falling. 

In short: 

• A 12-month term deposit provides certainty and fosters discipline
• A savings account offers greater flexibility

See also: Savings accounts vs Term Deposits: Which is better?

How to compare 12-month term deposits

When you’re shopping around for 12-month term deposits, it pays to look beyond just the headline rate. Key features to look for and compare include: 

Competitive interest rate

Check whether the rate is ongoing or a promotional offer. Some providers advertise short-term bonus rates that may not apply for the full term, so it’s important to know exactly what you’ll really earn over the 12 months.

Interest payment frequency

Term deposits may pay interest monthly, quarterly or at maturity (most common). More frequent payments can improve flexibility especially if you want regular income, though they sometimes come with slightly lower rates. 

Minimum deposit requirements

Term deposit providers have different entry thresholds. Some require as little as $1,000, while others may require $5,000 or more. Make sure the minimum deposit aligns with your budget.

Early withdrawal conditions and penalties

Accessing your funds early can be restricted and may require notice. Most lenders reduce your interest or charge a fee if you break the term early, so it’s important to understand these conditions upfront.

Automatic rollover

Look for accounts that clearly disclose rollover terms and allow you to opt out or provide instructions before maturity. 

Ideally, it’s best you stay on top of term deposit maturity dates. If your deposit rolls over into an interest rate lower than what you previously had, it could mean missing out on better returns or offers that may be available elsewhere.

See also: Understanding term deposit automatic rollovers

How to open a term deposit

Opening a term deposit is usually a straightforward process. 

1. Compare rates and choose a provider. Using comparison sites is especially helpful for this. 
2. Decide on your deposit amount. Make sure you meet the minimum deposit requirements. 
3. Apply online or in branch. 
4. Transfer your funds, and let your money stay put until the deposit matures.

1. Take note: Once your term begins, your rate is fixed until maturity. 

Pros and cons of a 12-month term deposit

Here are the main advantages and disadvantages of a 12-month term deposit. 

Pros

• Guaranteed returns with a fixed rate
• No need to meet ongoing conditions 
• Encourages disciplined saving
• Generally lower risk than other investments

Cons

• Limited access to your money during the term
• Early withdrawal may incur penalties or reduced interest
• You could miss out if interest rates rise during your term
• Less flexible than savings accounts

Savings.com.au’s two cents

A 12-month term deposit could be a good choice for someone looking to safely grow their savings while maintaining a reasonable level of flexibility. 

But before committing your money, consider the following questions:

• What are you saving for?
• What kind of interest rate are you after?
• How long can you afford to not touch that money?
• What might happen to the cash rate while your money is locked for a year?

If your goals are set, meet the requirements and you understand what putting your cash in a 12-month term deposit entails, this may be a good and low-risk way to grow your savings.  

See also: Are term deposits worth it?

As always, make sure you compare options across providers as rates, features and conditions can differ significantly.