How to Compare High‑Interest Savings and Term Deposit Rates in New Zealand 2025

What “high interest” really means in 2025

Headline interest rates are a starting point — not the whole story. In 2025, some longer-term term deposits at major banks are advertised just above 4% per annum, while certain on‑call savings products offer competitive gross rates with full daily access. But effective returns vary by compounding frequency, tax settings and early withdrawal rules. Understanding these factors helps you compare like for like.

Main product types and how they trade off returns vs access

• On‑call (no notice) accounts
• Offer immediate access to funds and daily interest accrual.
• Practical for emergency funds or cash you need frequently.

• Some specialist on‑call accounts in 2025 have offered materially higher rates than standard everyday accounts while keeping liquidity.

• Notice saver accounts
• Require advance notice (commonly 32–90 days) for withdrawals.
• Sit between fully liquid accounts and fixed term deposits on the liquidity/yield spectrum.

• Offer higher rates than no‑notice accounts, typically varying by notice period.

• Term deposits (fixed‑term)
• Lock funds for a defined period (from around 30 days up to five years).
• Generally pay higher rates for longer terms; very short terms pay less than longer ones.
• Early withdrawal usually reduces or eliminates interest payments.

Current market snapshot (what to expect in 2025)

• Term deposits: Longer terms are among the highest straightforward risk‑free returns available in the deposit market, with some offerings from major banks slightly above 4% for multi‑year terms in 2025. Shorter terms pay materially less.
• On‑call alternatives: Select on‑call accounts have been competitive in 2025; for example, a named on‑call product offered a gross rate around 3.25% (as of mid‑April 2025) with daily liquidity and monthly pay‑outs.
• Notice saver accounts: Providers have offered notice saver rates that generally fall between on‑call and fixed‑term levels, with typical ranges depending on notice length.

Note: These figures and examples reflect conditions observed in 2025 and are included to illustrate product positioning rather than to recommend a specific provider.

How compounding and payment frequency affect effective return

Advertised rates can be expressed as “interest at maturity” or shown as simple annual rates. Two key factors change what you actually receive:

• Compounding frequency: Daily or monthly compounding increases effective annual yield compared with interest paid only at maturity.
• Payment timing: Interest paid monthly or quarterly lets you reinvest earnings earlier, improving effective returns versus a lump sum paid at maturity.

Actionable tip: Ask providers for the effective annual rate (EAR) or use an online calculator to compare yields on a like‑for‑like basis.

Tax treatment and product structure

• PIEs (Portfolio Investment Entities): Some savings products are structured as PIEs, which may reduce tax on returns for many savers depending on their income. PIE tax treatment can materially affect after‑tax yields.
• Personal tax: Interest earned outside PIE structures is generally taxed at your marginal rate. When comparing products, model after‑tax returns for your tax bracket rather than relying solely on headline gross rates.

Access rules, penalties and practical considerations

• Early withdrawal penalties: With term deposits, withdrawing funds before maturity commonly results in reduced interest or no interest for the period the funds were held. Notice saver accounts typically allow withdrawal after the notice period without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products have minimum deposit requirements (commonly around a low‑thousand amount) and may have account fees or conditions. Confirm these before committing funds.
• Discretionary rates: Banks sometimes offer higher discretionary rates for larger deposits or special arrangements; always verify whether a quoted rate is standard or discretionary and for how long it applies.

Safety and deposit protection (important 2025 update)

From 1 July 2025 New Zealand’s Deposit Compensation Scheme became active for eligible deposits at participating banks and authorised non‑bank financial institutions. Key points to check:

• Coverage: Confirm whether your provider and specific product are eligible and what the insured limit is for each depositor and account type.
• Conditions and exclusions: Some investment products or non‑deposit assets may not be covered. Read scheme rules and provider disclosures carefully.

Before placing sizable sums, verify coverage and any applicable caps or exclusions with the provider.

Practical checklist for comparing accounts and term deposits

• Compare effective yields (EAR), not just headline rates.
• Confirm compounding frequency and interest payment dates.
• Check whether the product is PIE‑structured and model after‑tax yields.
• Ask about minimum balances, fees, and whether rates are discretionary or promotional.
• Understand access rules and early‑withdrawal consequences.
• Verify eligibility and limits under the Deposit Compensation Scheme.
• Consider diversifying across account types and term lengths to balance liquidity with returns.

Which product suits different needs

• If you need full daily access and prefer liquidity: consider competitive on‑call accounts with daily withdrawals and monthly interest pay‑outs.
• If you can plan withdrawals and want better returns than a standard savings account: notice saver accounts with a defined notice period can be a sensible middle ground.
• If you have funds you can lock away for months or years: term deposits generally provide the highest straightforward returns, with longer terms tending to pay more.

Always weigh tax, compounding, access rules and deposit insurance before choosing.

Scenario planning and diversification

• Laddering term deposits: Stagger maturities across multiple terms to create regular access points while capturing higher rates on longer terms.
• Mix account types: Keep an emergency fund in a liquid on‑call account, use notice saver accounts for planned expenses, and allocate surplus funds to term deposits for improved yields.
• Revisit decisions: Rates and protection schemes evolve; review your allocations periodically, especially around regulatory or market changes such as the 2025 deposit protection update.

Final considerations

Comparing high‑interest savings and term deposits in New Zealand in 2025 requires looking beyond headline rates. Evaluate effective yield, tax treatment, access constraints, minimums and deposit protection. Use a methodical checklist and consider diversifying across product types and maturities to match your cash‑flow needs and risk tolerance.

Sources

• Canstar – Best term deposit rates and market commentary: https://www.canstar.co.nz/term-deposits/best-term-deposit-rates/
• Canstar – High‑interest savings accounts overview: https://www.canstar.co.nz/savings-accounts/best-high-interest-savings-accounts-in-new-zealand/

Disclaimer: Prices, rates and product availability may vary by region, dealer, and current promotions; readers should verify specific rates, terms and coverage with local providers or dealers. Disclaimer: Any promotional offers or incentives mentioned in market commentary are subject to change, may vary by location, and are governed by provider terms and conditions.