What to do when your term deposit matures

A term deposit is a pretty hands-off investment, until the time comes when it approaches maturity. Whether maturity is in weeks, months, or years, it's essential to understand the options available to you to make an informed decision about your money.

• Option one - Automatic rollover
• Option two - Another term deposit
• Option three - Transfer funds to a savings or transaction account
• Option four - Withdraw some and invest the rest

Find out more on all four term deposit maturity options below.

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What happens when a term deposit matures?

When you open a term deposit, you choose how long you want to lock away - invest - your money for. This is known as the term and usually varies from three to 60 months. Once you’ve deposited the money, it’s locked away for the agreed period.

When the term deposit reaches the end of the term, this is known as ‘maturity.’ The lender will automatically credit your account with the principal amount and interest earned (enabling you to access your funds).

Your lender will typically notify you two weeks before your term deposit approaches its maturity date and will outline the options available e.g. re-invest, withdraw. In some instances, if you do not respond to your lender or advise them otherwise, your term deposit may automatically rollover for the same fixed period, but not necessarily the same interest rate. There’s a good chance this new term deposit will have a lower interest rate than it did before.

Helpful tip: Once you open your term deposit, make a note in your calendar or set a reminder on your phone of the maturity date. This way, you won’t forget.

Your options at term deposit maturity

When your term deposit reaches its maturity date, several things can occur, depending on your bank's policies and your instructions, which is why it’s important to have a strategy in place.

Automatic renewal

Many banks have a default policy of automatically renewing your term deposit for the same duration at the prevailing interest rate. This can be convenient if you want to continue your investment without any hassle. However, the interest rate may change, so it's crucial to review the new terms.

Choose a new term deposit

You can also opt to choose a new term and reinvest your funds. This decision allows you to take advantage of any changes in interest rates (compare your existing lender with other market offers) or align your investment with your financial goals.

Transfer to savings or transaction account

You can withdraw the money from the term deposit and open a high-interest savings account. Savings accounts are a low-risk, flexible way to invest your money and often come with bonus rates - so long as you meet the required conditions e.g. depositing a certain amount of money per month into the account.

If you’ve been receiving regular interest payments, they likely would have been made into a linked transaction account - either one the bank set up for you, or one you’ve nominated. It’s likely the principal will go into there as well.

Withdraw some and invest the rest

You could withdraw some of the total term deposit maturity amount to fund upcoming purchases (e.g. holiday, wedding), while investing the rest in a new term deposit with a term of your choice.

How to choose the best option

Your choice at maturity largely depends on your financial goals and market conditions. Here are some factors to consider when deciding what to do with your matured term deposit:

• Interest rates - Assess the current interest rate environment. If rates have risen, it might be more appealing to reinvest at a higher rate. Conversely, if rates have fallen, consider alternative options.
• Financial goals - Think about your short-term and long-term financial objectives. Do you need access to the money soon for a big-ticket item or holiday, or can you afford to lock it away for a more extended period? If you require funds for an upcoming expense, transferring to a savings account or choosing a shorter-term deposit may be more suitable.
• Shop around - Don't hesitate to shop around. Different banks may offer more competitive rates or terms, so it's wise to explore your options and even negotiate with your current bank.

My bank has automatically rolled over my matured deposit - can I fix this?

Yes, you can. If your bank has automatically renewed your term deposit, but you wish to make changes, you typically have a grace period during which you can do so. This window varies between banks but is usually around one to ten days.

Contact your bank promptly to discuss your options and make any necessary adjustments.

Can I withdraw my money before the term deposit maturity?

One of the main purposes of a term deposit is to remove the temptation to dip into your savings for money that is meant to be set aside for something else - this is why the money is ‘locked away.’

While withdrawing funds before the maturity date of your term deposit can typically be done, it may come with penalties. These penalties often involve early exit fees (to be determined by the institution) and forfeiting a portion of the interest earned.

You may also be required to provide written notice before you wish to withdraw your funds, which is usually 31 days in advance. So if you need that money ASAP, you’ll have to wait patiently.

The exact terms and penalties vary by lender, so it's crucial to consult your lender’s policies before making any premature withdrawals.

Read more: Term Deposit Basics

Hanan Dervisevic

Finance Journalist

Hanan is a InfoChoice Group journalist with an interest in home loans, property investing, money saving tactics, and educating young Australians like herself on personal finance.