Fixed-Term Deposits – Locking In Rates for Money With a Clear Time Horizon

By: Simon Heinrich – Last updated: 09/2026 

This page explains what a fixed-term deposit account actually is, why you might want one, how the deposit-laddering strategy works, and what to watch for when choosing a provider.

The common rule of thumb: fixed-term deposits suit money that goes beyond your emergency fund and that you genuinely won’t need for a set period — usually between one and ten years. Unlike an instant-access savings account, you lock your money away for that period, but in exchange you get a rate guaranteed for the entire term.

What exactly is a fixed-term deposit account?

A fixed-term deposit account (in German: Festgeld) holds a fixed amount for a pre-agreed term — commonly anywhere from six months to ten years. The interest rate is locked for the entire term and won’t change regardless of what happens in the market. At the end of the term, your principal plus interest is automatically paid out to your reference account, unless you’ve arranged automatic rollover in advance.

A fixed-term deposit is not a payment account, deposits and withdrawals run through a reference account, usually your checking account. Opening a fixed-term deposit account is not reported to the Schufa.

Why you might actually need one

A fixed-term deposit makes sense once you’ve already built an emergency fund in an instant-access savings account and want to set aside additional money for a known future point like a down payment, a major purchase, or simply to lock in today’s rate for several years. Current top rates range from 2.9% for six months to 3.5% for ten years and are generally somewhat higher than comparable instant-access rates, in exchange for giving up the ability to access the money at any time.

Important to know: early termination is generally not possible with fixed-term deposits. Some banks allow it as a courtesy, but usually only in exchange for forfeiting accrued interest and sometimes a processing fee. Only commit money you genuinely won’t need for the chosen term.

 

Is it safe?

Just like instant-access savings, your capital doesn’t fluctuate with the market — what you deposit stays intact and only grows through the contractually guaranteed interest. The same European deposit protection applies: up to 100,000 Euro per customer per bank, or 200,000 Euro for joint accounts. This holds whether the bank is based in Germany, Estonia, or elsewhere in the EU.

To cover all bases, it is also worth considering the economic stability of the bank’s home country. Banks from very stable economies carry essentially no additional concern, while countries with weaker credit ratings carry a theoretically higher residual risk, even though deposit protection formally works the same way.

Three ways to use fixed-term deposits

1. The simple approach – one amount, one term

If you already know exactly when you’ll need your money again, you can lock in the entire amount for the matching term:

  • Bigbank – an Estonian bank under EU deposit protection, offering attractive rates across many terms (Ad)

  • Stellantis Bank – simple account opening, solid conditions for shorter and medium terms (Ad)

2. The deposit ladder – staggered terms for more flexibility

If you’re not sure exactly how long you want to lock your money away, or want regular partial access, consider the so-called deposit ladder: split your total amount into equal parts and lock each part into a different term, for example one to five years. After one year, the first tranche matures — if you don’t need it, you reinvest it at the longest term, keeping the ladder running on its own. 

Here’s how to set it up:

  • Set aside your emergency fund first — that stays in your instant-access savings account; only the remainder goes into the ladder
  • Decide on the number of rungs:  three for more flexibility, five for a higher blended rate
  • Shop for the best provider separately for each term instead of using one bank for the whole ladder
  • Spread your tax-free allowances (Freistellungsauftrag) sensibly across the banks involved

For the different terms in your ladder, you can use platforms like Deutsche Bank Zinsmarkt via checking accounts with Postbank (Ad) or Norisbank (Ad) and Raisin (Ad) across several partner banks. One marketplace account is enough to cover multiple rungs of your ladder at once.

3. For rate optimizers – always chasing the best term-adjusted return

If you’re willing to compare the market for each term individually, specialized comparison sites will show you the current best conditions. For an ongoing, systematic comparison across many providers, independent German comparison sites like Kritische Anleger  track current rates and bank creditworthiness.

Through the Freistellungsauftrag, you can earn up to 1,000 Euro in interest per year completely tax-free (2,000 Euro for jointly filing couples). Set this up directly with your bank, otherwise it automatically withholds capital gains tax on your interest. If you spread savings across several banks, split the allowance sensibly between them.

Fixed-term deposit or instant-access savings?

For your emergency fund, instant-access savings remains the right choice, since you stay fully flexible. Fixed-term deposits only make sense afterward, for money with a known time horizon. For the full comparison of both models, including a worked example, see our page Instant-Access Savings vs. Fixed-Term Deposit.