Interest Rates and Payments on Term Deposits

Term deposits typically feature a fixed interest rate, as opposed to the variable rates of interest offered on high interest savings accounts which move up and down in response to official interest rate rises.

A fixed interest rate means that you get a fixed return on your investment, regardless of whatever happens with interest rates and the economy. This means that there is more certainty and security in a term deposit compared to a savings account, and less volatility than other investments in assets like property, commercial property or the stockmarket.

For terms shorter than one year, your interest will be paid at maturity of the term deposit. This means that for a 6 month term deposit, you will be paid your interest payment at a date 6 months after your deposit, as well having access to the original deposit amount at this date. This short term deposit is not advantageous if you rely on a regular monthly income stream.

For term deposit terms longer than one year, you will have an option of when you you would like to receive interest, from monthly options for interest payments to semi annually. The following options apply for payments of term deposits.

Short Term - Paid at Maturity

There are a range of term deposit options under one year in length which are referred to as 'short term' term deposit. For these short term deposits, the interest amount is paid at maturity. This means that  your interest is paid at the end of the term deposit period. Short term deposits are terms such as:

• 1 Month (compare rates)
• 2 Months 
• 3 Months
• 6 Months
• 9 Months

Long Term - Payment Options

Longer term deposits have the advantage of allowing you to choose when you can define the dates for the interest payments rather than waiting for the term deposit to mature. Long term deposits are terms such as:

• 2 Years
• 3 Years
• 4 Years
• 5 Years
• 7 Years

With a longer term deposit, you can choose interest payment frequencies such as:

Annually: your interest is paid at the end of 12 month period

Semi-annually: your interest is paid every six months 

Quarterly: your interest is paid every three months 

The payment frequency differs between term deposit providers so be sure to pick an interest payment time frame that suits your requirement for income.