Term Deposit Calculator

Wondering what your term deposit is actually worth at the end of the term? Enter your deposit, the rate you have been offered and how long you are locking it away for, and see what it earns, before or after resident withholding tax.

What is a term deposit?

A term deposit is a fixed rate, fixed term investment. You lock your money away for a set period, and in return the bank pays a set rate of interest.

It is a low risk way to save, and a low maintenance one. It can also be useful if you tend to spend what is sitting in your everyday account, because the penalty for breaking the term early is usually enough to keep your hands off it.

What is a good term deposit rate?

Term deposit rates move, often in line with the Reserve Bank of New Zealand's official cash rate, and they differ from bank to bank. A good rate is one that is competitive against what else is on offer for the same term, and that suits when you actually need the money back.

Rate is not the only thing to weigh up. Check how often the interest is paid, whether it is paid out or reinvested, and what the bank's minimum deposit is. Before you lock a term in, compare it against a high interest savings account: if you are not gaining much for giving up access to the money, the savings account may be the better call.

How long do you have to lock the money away?

Terms usually run from one month to five years. Withdraw before the term ends and you can expect an early withdrawal fee or a cut to the interest you have earned, so pick a term you can live with.

What are the downsides of a term deposit?

Lower returns than growth assets

A term deposit buys certainty, and certainty is paid for with a lower return than you would expect from shares or property over the long run. What you earn depends on how much you deposit and for how long, so it pays to shop the rate around.

Inflation risk

A term deposit does not always keep pace with inflation. If rates rise while your money is locked in, you do not get the benefit until the term ends. That matters most on terms longer than 12 months.

Your money is locked away

Life changes fast. If everything you have is in a term deposit and you need cash before maturity, you will usually get only part of the interest, and you may pay a fee or hand back interest already credited. Keep an emergency buffer outside the term.

Terms worth knowing

Initial deposit: the opening balance of your term deposit.

Term length: how long the money is locked away. Your rate is fixed for that whole period.

Interest rate: the annual rate the bank pays on your balance, quoted as a percentage a year (p.a.).

Annual percentage yield (APY): what the deposit earns over a year once compounding is counted, rather than the headline rate.

Compounding interest: interest that is paid back into the deposit, so it earns interest of its own.

Resident withholding tax (RWT): the tax the bank deducts from your interest before it reaches you.

Early withdrawal penalty: what it costs you to break the term before maturity.

How to work out what you will earn

Because the rate is fixed for the term, you can work out what you will have at maturity before you commit:

1. Decide how much to deposit, keeping enough outside the term to cover the unexpected.
2. Enter that amount as your opening deposit.
3. Choose the term, in months or years.
4. Enter the rate the bank is offering, then choose when the interest is paid and your RWT rate.

The interest schedule shows each interest payment, the RWT deducted, and the balance as it grows.

Where a term deposit fits

A term deposit is a parking space for money you will need soon and cannot afford to see fall in value: the house deposit, the tax bill, the emergency fund. Money you will not touch for a decade usually belongs somewhere with more growth in it, which for most New Zealanders starts with KiwiSaver and the fund it sits in.

If you are weighing up where a lump sum should go, that is a conversation worth having. Ask us and we will work through it with you.

Frequently asked questions

Are term deposits worth it?

For short horizons, yes. They are one of the safest homes for money you cannot risk, and the return is known before you start. Over long periods, growth assets have historically done better, so the question is really how soon you need the money.

What tax do you pay on term deposit interest in NZ?

Interest is taxed through Resident Withholding Tax, which the bank deducts before paying you. Your rate follows your taxable income, and there are separate rates for trusts, companies and partnerships. Give the bank your IRD number and elect the right rate: without an IRD number the rate is 45%.

The bands above follow the personal income tax brackets, the same ones behind our PAYE calculator.

How is interest calculated on a term deposit?

At the rate the bank quoted, applied to your balance for the length of the term. The rate is fixed, so market moves during the term do not change what you get. What does change the total is when the interest is paid: paid at maturity it is simple interest on your deposit, while interest paid monthly or quarterly is reinvested and earns interest of its own.

Who offers term deposits in New Zealand?

The main banks, credit unions, building societies and the online challenger banks. Rates for the same term vary between them, so it is worth asking more than one.

Is my money safe in a term deposit?

New Zealand now has a Depositor Compensation Scheme, run by the Reserve Bank, which protects up to $100,000 per depositor per licensed institution if that institution fails. It covers term deposits and savings accounts held with licensed deposit takers. Spreading a large sum across institutions keeps more of it inside that limit.