The Difference Between Term Deposit Accounts and High-Interest Savings Accounts

When it comes to deciding exactly what to do with our savings, we can often be a bit spoilt for choice. There is a seemingly endless array of options available to us, and it can sometimes be rather overwhelming.

The simplest option is of course to open a savings account with a bank (often utilising online banking and the more beneficial interest rates).  But even within this, there is a vast range of choice. It is therefore vital to understand the differences between the two most popular bank saving options: the term deposit account and high-interest savings accounts.

Term deposits

A term deposit account is where the individual puts his or her savings into an account with a fixed rate of interest. The key thing about such accounts is that they are ‘locked’ away for a certain period, such as six months, one year or two years. In this time the account holder cannot touch the money (facing harsh penalties and fees if they do withdraw) until the fixed term is up and the account has matured. UBank currently offer Australians one of the highest term deposit rates on their term deposit account.


  • One of the biggest advantages of a term deposit accounts is that the temptation to dip into your savings for the expenses of daily living, or making big purchases, is removed from the equation. In some ways term deposits are an investment, rather than an account.
  • The fact term deposits have a fixed interest rate means they are safe and protected from the fluctuating financial climate. Interest rates are subject to change at any time according to a whole range of different factors, and while a term deposit might not have spectacular rates (it is low-risk, after all, although on occasion rates can be excellent), they offer consistency and security in their fixed rates.
  • The interest rate you are given generally increases with the amount you invest.

High-interest savings account

High interest savings accounts are not locked into a fixed interest rate, and neither are they locked into a fixed time period. These accounts allow the account holder access to the money at any point. While the interest rates are naturally fairly high, they are subject to the wider ebb and flow of the economic climate and thus can fall frustratingly low at times.


  • The key benefit of high-interest savings accounts must be that they offer you the chance to access your money should you need it quickly. It also allows you to shift your money to other savings accounts should a good deal come along from another bank.
  • Many of the best high-interest savings accounts are tied to your current account – and they can only be managed online. This allows you to very easily transfer funds between accounts and keep an eye on your money from the comfort of your armchair.
  • If you meet a minimum balance and perhaps a minimum monthly payment requirement, you may be entitled to certain bonus or promotional interest rates with your bank. Such rates are also usually offered when you first open your account.

Richard is a financial expert who enjoys blogging about all things banking, notably term deposit accounts and high interest savings accounts.

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