One of the safe and secure ways to save and invest money is term deposit. With a fixed interest rate, you’ll receive guaranteed returns after the term. With so many banks offering this investment product, it is better to do some term deposit comparison. Check the latest term deposit rates in Australia before signing anything so you’ll get the most out of your investment.
But what happens if you withdraw your money before maturity or before the term ends? You need to pay the penalty. In this article, take a look at some of the things that you need to know about term deposit penalties:
- If you need to withdraw your money in the term deposit before its maturity, you may need to give advance notice to your bank. This can be 31 days. However, there are some banks that process early withdrawal requests as soon as they receive them. Make sure to check the terms and conditions so you’ll know what to do in case of early term deposit withdrawal.
- Banks vary in the way they calculate the penalties for those who wish to withdraw their money before the term ends. Some may deduct a percentage from your interest rate. There can also be a break cost or break fee which relies on factors such as the bank’s current interest rate, the rate when you started the term deposit, as well as the amount of money in your term deposit.
- The minimum balance limit plays a role in term deposits. If you intend to withdraw a partial amount and your account balance goes beyond the minimum limit, your term deposit account will be closed automatically. The reduction of the interest rate will likewise be applicable to the total account balance.
- Another fee to consider should you wish to withdraw your money before maturity is the check drawing fee. There are financial institutions that pay back the interest earned through a bank check. They can also transfer the money into your transaction account. The check drawing fee comes in when you decide to receive your money through a bank check.
- Term deposit penalties can be hefty, so make sure to think about the situation carefully before withdrawing your money.
Avoid paying term deposit penalties. Before getting a term deposit account, make sure that you will not need the money for a certain period of time.
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