Term deposits offer a guaranteed return, making them particularly popular among more cautious investors or as a low-risk component of a diversified investment portfolio. However, term deposits require you to lock your money away for a set period, and you may be required to pay a penalty fee if you want to draw on your account before it matures. In order to properly compare products, it’s important to fully understand what’s on offer. Here’s a glossary of the key terms you should know when researching a term deposit. Financial Claims Scheme Australia’s Financial Claims Scheme guarantees bank deposits up to $250,000. That makes your term deposit even more secure, as it’s protected against unforeseen economic conditions that could potentially wipe out other investments. Fixed-term deposit A fixed-term deposit pays a set interest rate on a lump sum over a pre-determined period. For example, you may choose to deposit $10,000 in a six-month term deposit at 3.2% interest. This would return an approximate profit of $160 when paid on maturity. Interest payment types Interest on term deposits can be generally paid in three different ways: monthly, quarterly or maturity. Interest is usually calculated daily and can be paid monthly or quarterly, depending on your account terms. ‘Paid on maturity’ means that the interest is paid in a lump sum at the end of the term deposit period. For example, if you open a one-year term deposit, your interest will be paid in a lump sum when the account ‘matures’ at the end of the 12 months. Long-term deposit If you’re really looking to build your savings and won’t need to access your money for a while, then a long-term deposit may be the investment you’re looking for. You’ll benefit from a higher interest rate and keep your funds safe from fluctuations in the stock market. It’s also a great way to improve your savings discipline if you’re prone to dipping into your savings account. Short-term deposit You generally can’t access money you put into a term deposit during the set time period you’ve selected. If you do need access to the funds, your financial services provider may apply a penalty fee. If you’re new to term deposits or feel uncomfortable locking your money away for a long period, a short-term deposit of three to six months may be a great fit for you. Short-term deposits tend to offer a lower interest rate, but you’ll get your money back sooner. Tenure The tenure of your term deposit refers to the period of time your money will be invested. For example, if you’ve opened a three-month term deposit, its tenure is three months. Shorter tenures tend to offer lower interest rates, while longer tenures will attract higher interest rates. Looking for a term deposit? InfoChoice can help you search and compare term depositoffers by providing useful information such as monthly account service fees and accessibility. You can also use our savings calculator to estimate how much interest you could earn.