Savings 101: Everything you need to know about term deposits


Posted September 2018 by NZCU Baywide


We answer all of the questions you’re asking about one of New Zealand’s most popular investment options...

Are you looking for a place to safely grow the cash you’ve accumulated?

Sometimes it can be difficult to decide which option is the best fit for your savings goals.

If you’re looking to earn secure, high returns and are comfortable locking your money away for a fixed length of time, then a term deposit could be the solution for you.

Still not sure if they’re a possible solution for your savings and investment strategy?

Below you’ll find the answers to some of your questions about fixed term investing, including:

  • What is a term deposit?
  • What’s the difference between a term deposit and a savings account?
  • How long do I have to invest?
  • What are the fees?
  • What happens when the term is up?
  • How is my interest paid?
  • How much money can I invest?
  • Can I withdraw my money early?
  • Who offers term deposits?
  • How do I apply?
  • How can I really maximise my investment?
  • So, is a term deposit right for me?

Let’s get started!

What is a term deposit?

A term deposit account is a secure, low risk savings strategy which sees you depositing a fixed amount of money over a term of your choosing.

Once deposited, your money earns interest at a fixed rate. This means you’ll know what interest you will have saved once the savings term is up, at the outset.

One thing you should note is that because your money is ‘locked away’ until the end of the term, you won't be able to access these funds until your investment matures.

What’s the difference between a term deposit and a savings account?


Term deposits and savings accounts offer different benefits. Determining which one is better for you comes down to a number of personal choices; how you like to save, and your saving goals.

  • Term deposits are more stable - they’re for a set term with a fixed interest, but you can’t make withdrawals or deposits until that term is up (without interest penalties).
  • Savings accounts are more flexible and sometimes offer additional features - they offer a variable interest rate subject to market conditions, and you can make withdrawals and deposits.
  • Remember, because term deposits are for a fixed term, you won’t receive the benefits of increasing interest rates; conversely, you won’t be penalised if interest rates fall.

How long do I have to invest?

Investments range from one month through to five year fixed terms. You have the freedom to choose which length of time best suits your savings goals:

  • A shorter deposit ( up to 12 months) might work best for you if you need access to your money in the near future. For example, if you’re saving for a life event.
  • Longer deposits (up to five years) might be your preferred option if you don’t need to access your money for some time. For example,if you’re saving for a home deposit or retirement.

What are the fees?

New Zealand’s financial institutions don’t generally charge fees for term deposits. If in doubt, check with your financial provider of choice..

What happens when the term is up?

When your deposit matures, you can either roll it over, withdraw it, or renew and reinvest it under another agreement.

How is my interest paid?

  • For shorter fixed deposits (12 months or less), interest may be paid on maturity (when the term is up).
  • For longer fixed deposits (up to five years), interest may be paid at various intervals, depending on your provider’s terms and the amount of your deposit.

How much money can I invest?

You can invest from $1,000 up to $5 million, depending upon your provider. They may also stipulate a minimum and a maximum deposit amount.

At NZCU Baywide, for example, our minimum deposit is $1,000 if you’re over 18 and $500 if you’re under 18 years of age, while our maximum deposit amount is $1 million.

Can I withdraw my money early?


Whether you can break your deposit will depend on the terms of your provider’s investment contract. Be aware that there may be penalties in the form of reduced interest rates on the withdrawn funds.

Who offers term deposits?

Most providers of financial services here in New Zealand offer fixed term investments.

Interest rates, minimum deposit rates, scheduling of interest payments, and penalty clauses differ from provider to provider, but you can easily check out and compare providers’ offerings online.

How do I apply?


You can quickly and easily invest online with your chosen provider by visiting their website. If you’re a new customer you may need to open an account and provide various forms of identification.

How can I really maximise my investment?

Term deposits are a relatively hassle-free savings strategy, make yours work even harder by:

● Shopping around for the best deal that suits you like you would a a loan for consolidating your debts or personal use, not only for the best interest rates but for minimum deposit requirements and the scheduling of your interest payments.

● Depositing as much accumulated savings as possible, to earn a better interest rate.

● Read the terms and conditions thoroughly so there are no surprises later on, especially around penalties if you break the deposit or conditions around re-investing. 

So, is a term deposit right for me?

  • If you don’t need to touch your money for a while, then it's a good, safe savings option.
  • If you find yourself delving into your savings accounts, it's a secure way to lock away your savings and keep it safe from your spending whims.
  • If interest rates are falling, it’s a perfect time to lock in and secure the highest return on your cash.

Saving money doesn’t have to be scary

Term deposits take the uncertainty out of your savings. In fact, they’re a stress-free, low-risk way to stash your cash and grow your savings. You simply select how long your money is deposited for, and then lock in a great rate for the life of the term so you know exactly how much money you’ll have by the end.

That’s the kind of saving certainty Kiwis can rely on!







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