What happens when a term deposit matures?

When a term deposit (TD) matures, it marks the end of your investment period, giving you access to your original funds along with the earned interest. At this point, you can decide whether to reinvest, withdraw, or explore other financial options.

Compare term deposits

When you open a term deposit, you select a fixed period, typically ranging from one to 60 months, during which your funds are locked. This period is known as the term.

A term deposit matures at the end of this chosen period. Upon maturity, your initial investment, along with the accrued interest, is credited to your account, allowing you to decide what to do with the funds next.

A term deposit is a fixed-return investment that pays out on a pre-specified date, known as the term deposit maturity date. While most institutions provide at least one week’s notice before this date, it’s a good idea to keep a note of this date to stay prepared. Upon maturity, you can decide how to manage your funds.

Here are your main options:

• Hold the funds temporarily until you make your decision
• Make a partial withdrawal and reinvest the balance
• Renew the deposit for another term
• Withdraw the full amount

Not take any action

If you don’t take any action when your term deposit matures, the institution may roll over the entire amount into a new deposit for the same period. The interest is paid at the current rate when the new TD is opened. Though this may be a good way to build your savings, the current rate may not be competitive.

If you missed your term deposit’s maturity date but don’t want the funds locked in for another term, you may still be able to take advantage of the ‘cooling-off’ period. Most term deposit providers offer a grace period, typically around a week, during which you can cancel the renewed term deposit without penalties. However, if you miss this grace period, you may need to pay an early exit penalty or other applicable fees to break the deposit.

Make a partial withdrawal and reinvest the balance

You can withdraw some of the total term deposit maturity amount to make some purchases or invest it elsewhere. The balance amount is reinvested in a new TD for your chosen period. This can be a flexible way to access funds while keeping the rest invested.

Renew the deposit for an additional period

You can either renew the deposit with the current bank or shop around for another one that may offer more competitive rates. Be mindful that longer terms don’t always guarantee higher interest rates, so it may be worth spending some time to do your research before you renew the deposit.

Make a full withdrawal

Another option is to withdraw the entire amount to invest elsewhere. Alternatively, you could withdraw the money and open a high-interest savings account, which is another popular low-risk investment option.

These accounts often provide flexibility, allowing you to access your funds at any time while still earning interest. Some may even offer higher rates if you meet specific conditions, such as maintaining a minimum balance or making regular deposits. This may be a good alternative if you prefer liquidity and want the ability to access your savings without locking them away for a fixed term. However, make sure to read the terms and conditions carefully to ensure you meet the criteria for earning the bonus interest.

You can also opt to invest your money elsewhere, depending on your financial goals and risk appetite.

Once you open a term deposit, you’re not allowed to withdraw it before the maturity date. This ensures you aren’t tempted to use the money elsewhere.

While early withdrawal is difficult, it isn’t impossible. You’ll often need to give notice to the institution and also pay the prepayment costs. The interest is also recalculated, and sometimes you may have to repay a portion of the interest already earned on the deposit.

It’s easy to forget to keep track of your term deposit because of the set-and-forget nature of it. Preparing for the maturity date can help to think ahead about what you want to do with your savings.