Term Deposit vs High Interest Savings Account Australia 2026: Which Wins?

Both term deposits and high interest savings accounts currently offer rates around 5% in Australia — but the similarities end there. One locks your money away for a fixed period in exchange for a guaranteed rate. The other keeps your money accessible but may vary the rate at any time.

The right choice depends on when you need the money, how disciplined you are with savings, and what you think interest rates will do next. Here's how to decide.

Current rates at a glance (June 2026)

Product	Best available rate	Typical big-4 rate
12-month term deposit	~5.10% p.a.	4.40–4.80% p.a.
6-month term deposit	~5.00% p.a.	4.30–4.60% p.a.
3-month term deposit	~4.80% p.a.	4.00–4.40% p.a.
High interest savings account (bonus rate)	Up to 5.90% p.a.	4.50–5.20% p.a.
High interest savings account (base rate)	1.20–2.50% p.a.	0.05–1.00% p.a.

Rates are indicative as at June 2026. Always compare current offers before depositing.

The headline HISA bonus rates can beat term deposit rates — but they come with conditions.

Use our Term Deposit Calculator to compare the exact dollar return from a term deposit at different rates and terms.

How each product works

Term deposits

A term deposit is a fixed-rate account where you deposit a lump sum for a set period (usually 1 month to 5 years) and earn a guaranteed rate. At maturity you receive your principal plus interest.

Key features:

Rate is locked for the full term — no changes regardless of what the RBA does
Interest can be paid monthly, quarterly, or at maturity (at maturity usually earns slightly more)
Early withdrawal is possible but incurs a penalty — typically a 20–80% reduction in earned interest, depending on how much of the term remains
Most are covered by the Australian Government Deposit Guarantee (Financial Claims Scheme) up to $250,000 per account holder per ADI

High interest savings accounts

A HISA pays a variable rate that the bank can change at any time. Most HISAs have two rates: a low base rate (sometimes as little as 0.05%) and a higher bonus rate that applies when you meet certain monthly conditions.

Typical bonus conditions:

Deposit a minimum amount each month (e.g. $2,000)
Make a minimum number of purchases on a linked account
Grow your balance (don't withdraw more than you deposit)

Key features:

Access your money anytime with no penalty
Rate can change with little notice — the bonus rate advertised today may not be available in 6 months
Bonus rate applies only when conditions are met; the base rate applies otherwise
Also covered by the $250,000 Financial Claims Scheme guarantee

The core trade-off

	Term deposit	High interest savings account
Rate certainty	Guaranteed for term	Variable — can change anytime
Access	Locked until maturity (penalty to exit early)	Fully accessible anytime
Rate level	4.80–5.10% for 12 months	5.50–5.90% with conditions met
Conditions	None — just don't withdraw	Monthly deposit, purchase, or growth requirements
Best for	Known future expense; disciplined savers	Emergency fund; ongoing savings contributions

When a term deposit wins

You have a specific future goal with a fixed date. Overseas holiday in 12 months, house deposit in 18 months, car replacement in 6 months. Locking the rate removes the risk of the bank cutting the HISA rate before you reach your goal.

You don't trust yourself not to spend it. The early withdrawal penalty creates a behavioural barrier. If having the money "locked away" stops you dipping into it, the lower flexibility is a feature, not a bug.

You expect rates to fall before your term ends. With markets pricing in RBA rate cuts in 2026-27, locking in a 5.10% 12-month term deposit now guarantees that rate even if the cash rate drops and banks cut HISA bonus rates accordingly.

You don't want to meet monthly conditions. Some people find the HISA bonus conditions — minimum deposits, linked card purchases — burdensome or easy to fail. A term deposit requires nothing once the money is in.

When a high interest savings account wins

Your money needs to stay accessible. Emergency funds should never be in a term deposit. The 3–6 months of living expenses most advisers recommend keeping in cash needs to be accessible without penalty.

You're adding to savings regularly. Term deposits are lump-sum products — you can't usually top them up mid-term. A HISA lets you add money whenever you like, and the interest is calculated on the daily balance.

You want the highest possible rate and you'll meet conditions. The best bonus HISA rates are currently above term deposit rates at comparable terms. If you reliably meet the monthly conditions (most people do with salary deposits), the bonus rate wins on yield.

You're uncertain about your timeline. If there's any chance you'll need the money before a set date, the term deposit penalty makes it the wrong choice.

The rate environment: what to consider in 2026

The yield curve on term deposits is currently slightly inverted — 6- to 12-month terms offer the best rates because markets are pricing in eventual RBA rate cuts, making longer-dated deposits less attractive to banks. This means locking in 12 months is likely the sweet spot if you're choosing a term deposit right now.

For HISAs, rates have tracked the cash rate closely. If the RBA starts cutting, banks tend to reduce bonus rates quickly. Locking in a 12-month term deposit hedges against that risk.

Tax on interest: both products are taxed the same way

Interest earned on both term deposits and HISAs is included in your taxable income in the year it is received (or credited). The bank withholds tax at the applicable rate if you don't provide your Tax File Number.

There is no tax difference between the two product types — both are treated as ordinary income. For term deposits, interest is usually included in income at maturity or when credited (depending on the payment schedule), so a 2-year term deposit paying at maturity may push significant interest into a single tax year.

Frequently asked questions

Are term deposits better than savings accounts in Australia right now?

It depends on your situation. In June 2026, the best HISA bonus rates (up to 5.90%) exceed the best 12-month term deposit rates (around 5.10%), but only if you consistently meet the monthly conditions. Term deposits offer rate certainty — the rate is locked in regardless of what the RBA does — which matters if you expect rates to fall before your term ends.

What happens if I withdraw from a term deposit early?

Most Australian banks allow early withdrawal but reduce the interest earned — typically by 20–80% depending on how much of the term has passed. Some banks require 31 days' notice before releasing funds. Check your specific product's terms before depositing if there's any chance you'll need early access.

Is my money safe in a term deposit or savings account?

Both are covered by the Australian Government's Financial Claims Scheme (FCS) up to $250,000 per account holder per Authorised Deposit-taking Institution (ADI). If the bank collapses, deposits up to that amount are guaranteed. For amounts above $250,000, consider spreading across multiple banks or ADIs.

Can I get a better rate by splitting between both?

Yes — many Australians keep their emergency fund in a HISA (for accessibility) and move excess savings into a term deposit once the emergency buffer is sufficient. This captures the higher bonus rate for accessible funds and locks in a guaranteed rate on the portion you won't need for a defined period.

Does the First Home Super Saver Scheme affect this decision?

If you're saving for a first home, the First Home Super Saver Scheme (FHSS) may offer better after-tax returns than either a term deposit or HISA by channelling savings through super (taxed at 15% instead of your marginal rate). Compare the after-tax FHSS return against the after-tax term deposit or HISA return for your specific income level.

Interest rates change frequently. The rates cited in this article are indicative as at June 2026. Always compare current rates from multiple providers before committing to a term deposit or savings account. This article is for general information only and does not constitute financial advice.