A term deposit is an investment product that allows you to lock away some cash for a set period of time in return for a guaranteed return on your money. The guaranteed interest rate makes term deposits a low-risk investment, but they can also be a handy strategic tool. For example, they can be used to delay a large interest payment until the following tax year, or, if you believe interest rates are about to fall, you can move money into a term deposit in order to lock in the current interest rate.

Term deposits are cash deposits made with an Authorised Deposit Taking Institution (ADI), which includes the major banks, regional and online banks, building societies and credit unions. As the name implies, the money can't be withdrawn before the end of the term - known as the maturity date - unless a penalty 'break fee' is paid.

Things to consider

There are four factors to consider before you open a term deposit: