When your term deposit matures, you’ll need to decide what to do with your funds. Whether you want to reinvest, withdraw, or explore another option, the right choice depends on your particular financial goals and circumstances. This article explores some of the different paths you can take when your term deposit reaches maturity.
Key points covered
- Options at maturity and instructions
- Grace periods
- Early withdrawal considerations
Term deposit maturity options
When you open a term deposit account, you’ll need to decide what happens when it reaches the end of its term, or "matures." These are your maturity instructions – essentially, directions on what the authorised deposit-taking institution (ADI) should do with your principal and interest once the term ends.
Here are some of the typical maturity options available to you
1. Hands-off renewal
If you don’t provide any instructions by the maturity date, depending on the terms and conditions of your term deposit, your ADI will likely reinvest/roll over your money into a new term deposit for the same term length.
This hands-off approach can keep your savings working for you without needing any direct action on your part. However, the new term may have a different interest rate (which may be higher or lower than your original interest rate), and if you don’t make any changes within the grace period (see “grace periods” below), you won’t be able to add more funds or change the term length until the term deposit matures again.
However, if you prefer a “set it and forget” method, this might be a suitable option for you, but you might wish to consider prevailing interest rates and whether your provider offers a loyalty bonus when you roll over your deposit in full.
2. Proactive management
For those who prefer to take a more active role, proactive management gives you the flexibility to adjust your investment before or at maturity. Instead of rolling over automatically, you can compare current interest rates, choose a new term, and/or add extra funds.
ADIs are generally required to send reminder letters before maturity so you should have time to review your options and make an informed decision about what happens to your term deposit when it matures, based on market rates and your individual goals and circumstances.
3. Full or partial withdrawal
When your deposit matures, you can also opt to withdraw some or all of the funds
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Full withdrawal: You can withdraw the entire balance, including the interest you’ve earned, and move it to another account of your choosing.
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Partial withdrawal: Depending on your provider’s rules, you may withdraw part of the money, while reinvesting/rolling over the remaining amount (keeping in mind you’ll still need to meet the minimum term deposit amount required by your ADI if it has one).
A partial withdrawal allows you to access funds while continuing to earn interest on the remaining balance.
Grace periods
A grace period is a window of time, usually between 7 and 10 days (depending on your ADI) after your term deposit matures, during which you can make changes to your account (e.g. topping up or changing the term) without incurring any penalties.
Does the grace period apply if you set maturity instructions from the start?
Yes, even if you set your maturity instructions at the start of your term, you should still have the grace period after maturity to adjust your plans.
To make changes to your term deposit, you’ll either need to contact your ADI before your term ends within the cut-off times for new instructions set by your ADI or during the grace period window after the maturity date and provide instructions on what you want to do with your funds.
Keep in mind that after the grace period ends, any changes to your term deposit may be subject to penalties or notice restrictions.
Early withdrawal considerations
If you want to withdraw funds from your term deposit before it matures, factors to consider include any notice period required to break early, and any early break costs or other related fees and charges.
Most ADIs require a notice period for early access, typically 31 days. This means you’ll need to inform your ADI in advance if you plan to withdraw your funds before the maturity date of your term deposit.
However, early withdrawal often comes with penalties, also known as early break costs. These can include an adjustment to the funds paid to you and potentially an administration fee or charge for accessing the money early. However, these break costs may be waived if you’re facing proven financial hardship.
Choosing your maturity option
Deciding what to do when your term deposit matures depends on a few key factors, like
- The current interest rate environment
- Your personal financial goals
- Your cash flow needs or other circumstances
Important Information
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