Does my term deposit automatically rollover?
A term deposit may seem like a “set and forget” investment, but you should keep an eye on it as the end of the term approaches.
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When it comes to managing your savings, understanding the specifics of a term deposit is crucial, especially as it nears its maturity date.
A common feature of term deposits is the option for automatic rollover, but not everyone may want their funds to be locked in for another term.
Here’s a guide to how term deposit rollovers work, and what steps you can take if you’re nearing the end of your term or if your deposit has already rolled over and you didn’t want it to.
A term deposit is a fixed-term investment offering a guaranteed interest rate for a set period of time.
At the end of this term, financial institutions often automatically rollover the deposit for another term unless instructed otherwise by the account holder.
This process involves reinvesting the principal amount in a new term deposit, usually at the prevailing interest rate, which might be different from the initial rate.
The interest earned on the initial deposit has an option to rollover with the principal dollar amount or be deposited to your nominated bank account depending on what was chosen at the time of the initial deposit.
The automatic rollover feature is designed for convenience, ensuring that your funds continue to earn interest without any action required on your part.
However, the new term deposit might have different terms and conditions, including the interest rate. Since interest rates can fluctuate, and any incentive you had the first time around (such as a “bonus rate”) may not apply upon reinvestment, you could end up earning less.
Your preference may be to use the cash for another purpose, put it into another investment, or try to find a better rate for a new term deposit.
It’s important to note that there is usually a grace period – a few days up to a week – after the maturity date during which you can make changes without penalty.
- Review the terms: Well before your term deposit matures, review its terms and conditions, focusing on maturity options and notification requirements.
- Set a reminder: Mark your calendar for a few weeks before the maturity date to decide whether you want to rollover, withdraw, or reinvest your funds differently.
- Contact your bank: If you decide against rolling over, contact your bank or financial institution before the maturity date to inform them of your decision. You can usually choose to have the funds transferred to a different account or withdrawn.
National Seniors Term Deposit
With no fees and flexible terms, the National Seniors Term Deposit allows you to lock in a competitive interest rate that’s protected for your fixed term.
You can earn competitive interest rates up to 4.85% per annum.
National Seniors members can earn a special rate of 4.85% for 6 months, 4.80% for 8 months, or 4.75% for 9 months on maturity for term deposits over $5,000.
Because of the way banks work – they are using the money you are saving to fund their other activities – they really don’t want you to pull out of a term deposit.
If your term deposit has already rolled over and you didn’t want it to, contact your bank as soon as possible. While terms vary, some institutions may still allow changes within a short period after rollover.
If you don’t catch it in time, withdrawing or changing a term deposit outside the grace period can be difficult as banks will usually require advance notice. If you can demonstrate you are experiencing hardship you may be able to access your funds without notice.
Regardless, you will normally receive a reduction in interest earned if you access your funds earlier than the new maturity date.
Most banks operate to a formula based on how much of the term has elapsed. If you pull out very early, you will lose most of the interest you might have earned. If the maturity date is close, the penalty may be less.
Make sure to ask about any rate reductions that apply and consider whether it’s worth making a change.
In any case, discuss with your bank the options available. But, again, thinking ahead is your best insurance.
National Seniors Australia Ltd ABN 89 050 523 003 arranges deposits as an authorised representative (AR 282736) of Auswide Bank Ltd, ABN 40 087 652 060 Australian Financial Services Licence 239686. We do not provide any advice based on any consideration of your objectives, financial situation or needs. A target market determination can be obtained at auswidebank.com.au/tmd. Before making a decision to invest, please consider the Terms and Conditions. If you make a deposit, we will receive a commission from Auswide Bank. For more information about our relationship with Auswide Bank please read the Financial Services Guide contained in the Terms and Conditions.*This account is protected by the Australian Government deposit guarantee. Up to $250,000 of deposits in ‘protected accounts’ held by an entity with Auswide Bank are covered under the Financial Claims Scheme. Information on the Financial Claims Scheme is available at www.fcs.gov.au. Rates subject to change.
