Can you withdraw a term deposit before maturity?
For anyone who’s looking to grow their savings, term deposits can be a risk-free and reliable option. Nominate an amount of money and how long you’d like to lock it away, and a nice little stack of interest will be waiting for you once that time is up.
But sometimes circumstances change, and at some point you might decide you urgently need those funds back.
While banks won’t prevent you from closing a term deposit early, they don’t necessarily make it easy. So if you’re thinking about making an early withdrawal on a term deposit, here are the conditions and penalties that may apply.
How do you withdraw a term deposit before maturity?
If you intend to withdraw all or part of your funds early, you’ll generally need to provide at least 31 days’ notice to your bank. Some won’t allow you to do this online, so you’ll need to either chat with a representative over the phone or visit a branch.
If you’re only withdrawing a portion of your funds prior to the maturity date, keep in mind that what’s left over can’t drop below the minimum deposit amount.
And if there are less than 31 days left on your term, the earliest you can access it is at maturity – unless things are absolutely dire, you’ll just have to be patient.
Are there penalties?
Lodging your money with a bank for a pre-specified amount of time allows them to finance things like home loans, credit cards and personal loans, so they generally don’t want customers drawing from term deposits prematurely.
Backing out inconveniences them in a pretty big way, so you’ll likely be slapped with a few penalties. These could include:
- Early withdrawal penalty / administration fee
- Interest rate adjustment
The administration fee for breaking a term deposit early is usually a flat fee of around $30.
Along with that, there will be an adjustment to the amount of interest you can expect to receive. For example, a reduction structure might look something like this:
When withdrawal is made | Interest rate reduction |
---|---|
Less than 7 days | No interest paid |
Less than 20% of term has passed | 90% |
20% to 39.99% of the term has passed | 80% |
40% to 59.99% of the term has passed | 60% |
60% to 79.99% of the term has passed | 40% |
80% to 99.99% of the term has passed | 20% |
Let’s put that into perspective. Imagine you’ve got $100,000 in a 12 month term deposit that's offering an interest rate of 0.70% p.a. which will be paid out at maturity. If you decide after just five months that you need that money back in your hands, you can expect a few adjustments to be made.
First of all, in this scenario you’ll need to provide 31 days’ notice, so the interest rate adjustment will take into account the extra month that will have elapsed by the time you receive your money. With that in mind, the calculations will look something like this.
The amount of interest accrued after six months (let’s say 181 days)
- $100,000 x 0.70% x 181 / 365 = $347.12
Interest rate adjustment
- 50% of the term remains, which means a 60% deduction will apply
- 60% of $347.12 = $208.27
- $347.12 - $208.27 = $138.85
In the above scenario, you’ll walk away with only $138.85 (along with the $100,000 you initially deposited, of course). And if your bank charges a prepayment administration fee, you’ll be looking at even less. So no matter when you terminate your term deposit, you stand to lose out on a good chunk of interest.
Things get a bit more complicated if interest has been paid out in the interim (many term deposits of one year or more pay out interest monthly). In this case, it might need to be recovered by the bank to account for the interest rate adjustment.
Despite all this, banks do tend to be more lenient in certain circumstances, such as if you’re experiencing extreme hardship. If that’s the case, you’ll generally receive your deposit back in full, plus all the interest that’s been accrued in the time since. The same goes if the account holder of the term deposit passes away.
How can I avoid having to close a term deposit early?
Ideally, you want to keep a term deposit for the full duration of the term. Having to close it early means you’ll only reap a portion of the benefits. Here are a few things you can do to avoid finding yourself in that position in the first place.
Keep a separate emergency fund
Regardless of your current circumstances, it’s always a good idea to have an emergency savings fund in case life takes an unexpected turn for the worse. Things like medical emergencies, redundancy, and evictions can hit at any time, and it’s generally advised to have at least three months’ worth of expenses set aside to help cushion the blow.
Opt for shorter terms
Long term deposits (terms of one year or more) are a pretty big commitment, so if you’re someone who tends to move money around frequently it might be best to avoid them altogether. The key, then, is to find the sweet middle ground in which you’re getting an attractive rate from your term deposit while not committing to a length that’s too much for you. Right there are several shorter term deposits starting with a '3' which might work for you.
If you’d like to compare term deposits, you might want to check out the selection below, or browse our term deposits comparison page for an even more comprehensive look. And if you feel that a savings account would suit you better, there are plenty to consider over at our high interest savings accounts comparison page.
Term deposit comparisons on Mozo - last updated 6 May 2024
-
Featured Product
Term Deposit
5.10% p.a.
6 months$1,000
Yes up to $250,000
Great rates and incentives incl. 0.10% added loyalty bonus at renewal. Option to have interest paid to another bank. Winner of the Mozo Experts Choice Awards 2024^ for Term Deposits.
CompareCompareTerm Deposit
Great rates and incentives incl. 0.10% added loyalty bonus at renewal. Option to have interest paid to another bank. Winner of the Mozo Experts Choice Awards 2024^ for Term Deposits.
- interest rate
- 5.10% p.a.
- Minimum deposit
- $1,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $1,000.00
- Maximum deposit
- $1,000,000.00
- Can interest be paid to another bank?
- yes
- Automatic rollover
- yes
Read our Mozo Review to learn more about the Judo Bank Term Deposit
-
Online Term Deposit
5.00% p.a.
7 months$5,000
Yes up to $250,000
No set-up or account keeping fees. Deposits up to $250,000 per customer are guaranteed by the Australian Government. Mozo Experts Choice winner for Term Deposit 2022.
CompareCompareOnline Term Deposit
No set-up or account keeping fees. Deposits up to $250,000 per customer are guaranteed by the Australian Government. Mozo Experts Choice winner for Term Deposit 2022.
- interest rate
- 4.80% p.a.
- Minimum deposit
- $5,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $5,000.00
- Maximum deposit
- $5,000,000.00
- Can interest be paid to another bank?
- yes
- Automatic rollover
- yes
Read our Mozo Review to learn more about the MyState Bank Online Term Deposit
-
Mozo experts choice awards won:
- Term Deposit - 2024
Term Deposit
5.00% p.a.
1 year$1,000
Yes up to $250,000
Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)
CompareCompareTerm Deposit
Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)
- interest rate
- 5.00% p.a.
- Minimum deposit
- $1,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $1,000.00
- Maximum deposit
- $2,000,000.00
- Can interest be paid to another bank?
- no
- Automatic rollover
- yes
Read our Mozo Review to learn more about the Rabobank Term Deposit
-
SMSF Term Deposit
5.10% p.a.
6 months$1,000
Yes up to $250,000
Apply digitally in minutes and manage your SMSF Term Deposit. Flexible cash flow management with three interest payment frequencies that suit you: monthly, yearly, or at maturity. Choose from terms of 3 months up to 5 years. No application or monthly account fees but eligibility criteria and terms and conditions apply. Only accessible to SMSFs with two or up to four individual trustees or one corporate trustee.
CompareCompareSMSF Term Deposit
Apply digitally in minutes and manage your SMSF Term Deposit. Flexible cash flow management with three interest payment frequencies that suit you: monthly, yearly, or at maturity. Choose from terms of 3 months up to 5 years. No application or monthly account fees but eligibility criteria and terms and conditions apply. Only accessible to SMSFs with two or up to four individual trustees or one corporate trustee.
- interest rate
- 5.10% p.a.
- Minimum deposit
- $1,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $1,000.00
- Maximum deposit
- $1,000,000.00
- Can interest be paid to another bank?
- yes
- Automatic rollover
- yes
-
Term Deposit
4.80% p.a.
9 months$1,000
Yes up to $250,000
Enjoy the certainty of a fixed interest rate combined with the convenience of online banking to set up and manage your term deposit at maturity. You can start investing from as little as $1,000 or up to $5,000,000.
CompareCompareTerm Deposit
Enjoy the certainty of a fixed interest rate combined with the convenience of online banking to set up and manage your term deposit at maturity. You can start investing from as little as $1,000 or up to $5,000,000.
- interest rate
- 4.75% p.a.
- Minimum deposit
- $1,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $1,000.00
- Maximum deposit
- $10,000,000.00
- Can interest be paid to another bank?
- yes
- Automatic rollover
- yes
Read our Mozo Review to learn more about the Bankwest Term Deposit
-
Mozo experts choice awards won:
- Term Deposit - 2024
Term Deposit
5.00% p.a.
6 months$1,000
Yes up to $250,000
Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)
CompareCompareTerm Deposit
Enjoy a competitive fixed interest with the choice of 1 month to 5 year terms. Start with as little as $1,000. Interest paid monthly, quarterly, half yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturity. (Terms and Conditions apply)
- interest rate
- 5.00% p.a.
- Minimum deposit
- $1,000.00
- Govt Deposit Guarantee
- Yes up to $250,000
- Minimum deposit
- $1,000.00
- Maximum deposit
- $2,000,000.00
- Can interest be paid to another bank?
- no
- Automatic rollover
- yes
Read our Mozo Review to learn more about the Rabobank Term Deposit
Your selected term deposits
Your selected term deposits
Your selected term deposits
Your selected term deposits
Your selected term deposits
Your selected term deposits
* Different interest rates apply to different amounts or different interest payment frequencies.
^See information about the Mozo Experts Choice Term Deposit Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.