Term Deposit
Money locked in a bank account for a fixed period (3-12 months) in exchange for a higher interest rate. You can't withdraw early without a penalty. Good for savings you won't need soon.
A term deposit is a savings product where you lock your money away for a fixed period, typically 3, 6, 9, or 12 months, in exchange for a higher interest rate than a regular savings account.
In New Zealand, term deposit rates vary between banks and move with the Official Cash Rate, so a range printed here would be stale before you read it. interest.co.nz lists what every bank is paying today, by term.
The trade-off is liquidity: you generally can't withdraw your money early without paying a penalty (usually a reduced interest rate). This makes term deposits best for money you know you won't need during the deposit period, like saving for a specific goal that's 6+ months away.
Why this matters
Term deposits are a low-risk way to earn better returns on your savings. If you have an emergency fund already sorted and extra cash sitting in a regular account earning minimal interest, moving some into a term deposit can earn you significantly more. Just make sure you won't need the money before the term ends.
More Banking terms
Open Banking
A system that lets you securely share your bank data with third-party apps via APIs. In NZ, Akahu provides open banking connections to all major banks. You control what data is shared and can revoke access anytime.
Direct Debit
An automatic payment where a company takes money from your account on a set schedule. Used for power bills, phone plans, insurance. You authorise it once and it happens automatically.
Automatic Payment (AP)
A payment you set up yourself to go out automatically on a schedule. Unlike a direct debit (which the company controls), you control the amount and timing of an AP.
On-Call Account
A savings account where you can deposit and withdraw money at any time. Lower interest than term deposits but instant access. Good for emergency funds.
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