- Automatic rollover is a feature that automatically starts the term deposit again for the same fixed period at the end of the term.
- Term deposit providers are required to provide a grace period starting from the day of the maturity during which you can overturn their decision.
- Many banks require 31 days' notice to withdraw your funds.
- Interest rate reduction is the most common penalty for early withdrawal of term deposits.
Term deposits are quite a simple product on the surface. You deposit a lump sum of cash with a bank or financial institution for a fixed period of time in return for earning a fixed rate of interest on the deposit.
At the end of the term, or maturity, surely you can just collect your deposit with interest and go home, right? Well, not always.
While your interest might be deposited into a linked bank account, you might not receive the principal back straight away. Instead, it may be reinvested into another term deposit, even if this isn't what you want. This is often a default feature known as automatic rollover.
Read also: Are term deposits a good investment option right now?
What is a term deposit automatic rollover?
Automatic rollover is a term deposit feature that will automatically start the term deposit again for the same fixed period at the end of the term (maturity) unless you advise the provider.
Typically, your bank will contact you when your term deposit is approaching its maturity date. If you say nothing or don't respond, your term deposit will start over again, for the same length of time but not necessarily the same interest rate (if rates have changed).
- Quick tip: Set a reminder for your term deposit maturity date just in case you miss the notification from your bank.
Even if your term deposit rolls over, you'll still receive the interest earned from the earlier term.
Want to earn a fixed interest rate on your cash? The table below features term deposits with some of the highest interest rates on the market for a six-month term.
| Bank | Term Deposit | Interest Rate | Interest Frequency | Term | Automatic Rollover | Maturity Alert | Early Withdrawal Available | Minimum Deposit | Maximum Deposit | Notice Period to Withdraw | Account Keeping Fee | Online Application | Joint Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.35% p.a. | Annually | 12 months | $1,000 | $1,000,000 | – | – |
| Promoted | Disclosure | ||||||||||
5.35% p.a. | At Maturity | 6 months | $5,000 | $19,999 | – | – | |||||||||||||
5.15% p.a. | At Maturity | 6 months | $1,000 | $1,000,000 | – | – |
What to do if you don’t want your term deposit to roll over?
If you miss your term deposit's maturity date and want to cancel it or move it to another term deposit or different investment vehicle, you can take advantage of a grace or 'cooling off' period.
Grace period (cooling-off period)
Grace periods are usually a week from your rollover date, during which term deposit providers are legally required to give you the option to pull out your term deposit. You need to act quickly because if you miss this period, then you’ll either have to leave the money where it is or pay the early withdrawal penalties.
Early withdrawal penalties
Banks typically don’t want term deposit customers to withdraw before the end of their term because they use these deposits for funding. Many banks require 31 days’ notice to withdraw your funds.
As a deterrent, they often impose restrictions and penalties for early withdrawal; the most common is an interest rate reduction calculated based on the term remaining.
A typical reduced interest schedule looks something like this, though this varies by lender:
Percentage of the term elapsed | Interest rate reduction |
0% to 20% | 90% |
20% to 40% | 80% |
40% to 60% | 60% |
60% to 80% | 40% |
80% to 100% | 20% |
Some term deposit providers may even charge an early exit fee in addition to slashing your interest earnings.
- Quick tip: It is entirely up to you to consider your options. It might be worth paying the fees and penalties if you’re moving the money to a new term deposit or another investment with a better interest rate.
What to do when your term deposit matures?
Here are your options once you receive the notice from your bank that your deposit is maturing.
Automatic rollover
If you want to keep your money where it is after it matures (and are happy with the interest rate and term), you can simply let your money roll over into another term deposit with the same institution. Sit back and let the bank do all the work.
Withdraw funds
If you decide to close the term deposit, you can ask your bank to transfer your principal plus interest to your nominated bank account – typically a transaction account whose details you supplied when you opened the term deposit.
Re-invest elsewhere
If you would rather reinvest the funds into another term deposit with the same bank, you may ask your provider if they can offer you a better rate than what others are offering. The worst they can say is no. If the offer is not better, you may opt to park your cash in a high-interest savings account or other investment products. Weigh your options.
Read also: Should you put your money in a savings account or invest it?
Savings.com.au's two cents
As the maturity of your term deposit approaches, make sure you advise your provider about what you want them to do with your funds.
If you want to keep the money in a term deposit, don't let it roll over automatically without comparing the different term deposit rates on offer across the market first. Rates are always changing, and the market is highly competitive, so a higher rate than you're rolling over into may have sprung up.