How to escape the 'renew' effect with your term deposit

About this post

Cherie Mildwater looks at term deposits and what to be aware of when your investment reaches maturity.

March 24, 2010

Most of us want to get more for our money, and term deposits are fast becoming a popular short-term option for investors to turn your cash into greater wealth.

Term deposits are sums of money deposited into an account with a fixed interest rate over a certain period, usually ranging anywhere from a month to several years. These are seen as a safer option, hence why they are fast becoming popular for low risk investments.

Nevertheless, there is an important piece of information some financial institutions may hide, and if you don’t ask the question or read the fine print then you may never know: what happens when your term deposit matures?

When your term deposit is approaching its investment expiration date, most financial institutions will contact you notifying you of this and list your maturity options; such as withdraw your funds, reinvest it or add more savings in a new account.

It is up to you to notify the term deposit provider of your decision prior to maturity. If you don’t, most banks will automatically renew your account for the same amount, term and frequency of interest payed. However the interest rate may not be the same and will most likely be set at a lower rate than the original rate.

If you don’t want your savings to be inaccessible for an additional period of time, take action by notifying your financial institution before it reaches maturity. If for some reason you don’t hear from them, make a note in your calendar to call them and state the choice for your investment.

Upon deciding which option to choose from when the term ends, ask yourself the following questions:

  • Do I require the money now?
  • If not, should I renew my term deposit?
  • How long do I want to invest for?
  • Should I reinvest with additional funds (interest received from original term deposit, or other funds) or should I reinvest the original funds?
  • Which financial institution will offer me the best rate?

Comparison websites such as RateCity are available 24 hours a day, seven days a week to assist you in finding some of the highest interest rates on offer for term deposits so you can get the most out of your investment.

RateCity’s average interest rates for one, three and five-year term deposits:

  • One-year: 5.65%
  • Three-year: 6.43%
  • Five-year: 6.48%



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