A term deposit is a savings and investment product wherein the money you deposited will earn a fixed interest rate over an agreed period of time, also called term. It can be for one month, one year, or even up to five years. It is a product used to deposit your money and grow your wealth, and since you cannot access your money throughout the term, you can build your savings and help develop healthy financial habits.
When it comes to term deposits in Australia, you may come across the term automatic rollover. It refers to whether or not your term deposit will automatically roll over into a new term as soon as it reaches its maturity date.
In this article, let’s delve into this feature so you will better understand the concept and avoid inconvenience later on.
When it reaches maturity, check if it is still an appropriate investment for you, and if the returns remain competitive. If not, then maybe it’s time to shop around and see which bank offers better interest rates for term deposits.
Your bank or credit union will inform you once your term deposit reaches maturity. They will let you know how much interest you’ve earned as well as your options.
If you do nothing, that’s the time when the automatic rollover will occur. A study has shown that most banks implement a dual pricing system wherein they automatically roll over maturing term deposits into new ones with the same term and the existing interest rate, unless you, as the depositor, intervene. Bear in mind that the new term deposit may have a lower interest rate, which surely isn’t what you want for your investment.
Inform your bank right away if you’re not satisfied with the new interest rate. Otherwise, you may need to pay a fee should you decide to get out of the new term deposit after the automatic rollover. That’s why it’s important to do some term deposit comparison before the maturity date so you can look for competitive interest rates.
In the event of an automatic rollover, the bank will disclose the new interest rate. They will also include the interest rate schedules in their rollover letters.
Do you have other ideas when it comes to automatic rollover of term deposits in Australia? Share your insights in the comments section.Read More →