Term deposit maturity options

What is term deposit maturity?

When you open a term deposit, you can choose the length of time for which you want to invest your money. This is known as the term, and terms typically range from 1 to 60 months. Once you’ve deposited your money, it’s locked away for the entirety of the term you choose.

When the term of your deposit comes to an end, this is when your term deposit reaches maturity. Once a deposit has matured, you can access the funds you initially invested as well as any interest that has been paid into the account.

Finder survey: How long do Australians invest in a term deposit?

The majority of Australians are willing to lock up their money for a year and take out term deposits for 12 months at a time.

What happens when my term deposit matures?

When a term deposit matures, your investment is complete and your account is officially closed. Access restrictions that apply during the term are lifted, allowing you to re-invest your money in another term deposit, invest it elsewhere, or simply withdraw it to use however you like. Your bank will usually contact you in the weeks leading up to your term deposit maturity date to let you know the term is about to end and outline the options available.

If you make no decision, the bank will usually assume you want to re-invest the money into another term deposit.

Options when your term deposit matures

Take no action / term deposit rollover

Often, if you do nothing and take no action your funds will be rolled over into a new term deposit with the same term length (this is sometimes referred to as tdr - term deposit rollover). The bank’s current interest rate for your chosen term will apply to your new investment.

While this can be a convenient way to continue building a bigger savings balance, the downside is that your bank’s current interest rate may not be competitive with the rates on offer elsewhere. Investing your money for the same term length may also not be suitable.

Choose a new term deposit

If you want to open another term deposit, have a think about a suitable investment time frame for you. It's always a good idea to compare current term deposits and consider choosing a new term and interest rate if you find a better offer elsewhere.

If you're opening a new term deposit, you may wish to top up your balance with extra funds. The more you invest, the greater your interest returns will be.

Withdraw some and invest the rest

You may want to withdraw some of the money to fund other purchases and investments, but invest the remainder in a new term deposit. For example, you could choose to withdraw the interest you've earned on your term deposit and keep your initial investment invested.

Withdraw it all and invest it elsewhere

You can withdraw the money from the account and invest it elsewhere, for example in the share market (here's how to buy shares online) or if you've decided to buy a property.

You could also consider making a one-off contribution into your superannuation. Not only does this greatly benefit your retirement balance, but there are tax benefits of contributing to your super. The drawback of this is that you won't be able to access the money again until you retire.

Withdraw it and open a high interest savings account

You can withdraw the money from the term deposit and open a high interest savings account instead. High interest savings accounts are another low-risk way to invest your money, and they usually offer better interest rates than term deposits. Some savings accounts, known as bonus savers, will offer a higher interest rate each month you meet a few conditions, like depositing a certain amount of money into the account. This is a great way to keep up good savings habits, and put the money earned from your term deposit back to work.

Our expert says

"These days you can find a better interest rate with a high interest savings account compared to a term deposit, but that doesn't necessarily mean it's the better option for you. If you're looking for a safe place to park your cash, particularly if it's a large amount, and you don't want to worry about making ongoing deposits then a term deposit would still be a better fit for this."

Alison Banney

Editor

Can I access the funds in my term deposit before maturity?

One of the key benefits of term deposits is that it’s quite difficult to access your funds before maturity. This removes the temptation to dip into your savings and spend the money that is meant to be set aside for something else.

However, while it is difficult to access your term deposit before maturity it’s not impossible, but there are terms and conditions attached. First, many banks will require you to provide written notice before you can withdraw your funds, and this notice typically has to be provided 31 days in advance. So if you want to access the money in your term deposit to meet urgent expenses, this restriction can cause problems.

Second, and perhaps more significant, is the fact that you will usually be charged with a fee and an interest rate penalty for withdrawing your funds early. Your bank will have a set formula for calculating how much to reduce the interest earned on your account, and in some cases you may actually have to repay some of the interest you have already been paid.

Looking at Commonwealth Bank as an example, you need to give 31 days' notice and potentially pay a $30 fee to break your term deposit early. Plus, the interest rate applied to your term up until this point will be adjusted down based on how early you want to access the money.

With this in mind, it’s important to think carefully about whether or not a term deposit is right for you before opening an account.

FAQs about term deposit maturation

• My bank has automatically rolled over my matured deposit into a new deposit – is it too late to stop this?

  There will usually be a 7-day cooling-off period following a rollover to allow you to decide whether the new deposit is right for you.

• What interest rate will I get if I roll over my term deposit at maturity?

  You will receive the current interest rate offered by your bank for your chosen investment term. This may be higher or lower than the rate you were previously getting.

• What does interest paid at maturity mean?

  This means that the interest earned on your term deposit will be paid at the end of the investment term.

• What happens to my term deposit at maturity?

  Unless you have specified otherwise, the default option is for your funds to be rolled over into a new term deposit for the same investment period.

• Do I need to wait until maturity to choose what will happen to my funds?

  No, you can provide maturity instructions to your bank at any stage during the term. In fact, you may even be able to provide these instructions when you apply for an account.

• Will my bank contact me when my term deposit is about to mature?

  Yes, your bank will contact you in the month leading up to maturity to remind you of the maturity date and inform you of your options.

Written by

Tim Falk

Writer

Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio

Co-written by

Alison Banney

Editor

Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full bio

Alison's expertise

Alison has written 625 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living