Term deposits are a popular investment choice for those who want a safe, low-risk way to grow their savings.
If you need to withdraw your funds early, you might be wondering about term deposit early withdrawal and what it means for your money.
What are the conditions of a term deposit?
Every financial institution is different, but there are a few conditions that apply to most term deposits across the board. One of these conditions is a minimum deposit amount. This condition refers to the amount of money you must give to the bank in order to open a term deposit. Some common minimum deposit amounts are $500, $1,000 and $5,000, but you should discuss the minimum amount with your bank before opening your term deposit.
Another condition is that you cannot access your money during your term. For example, if you commit to a 12-month term deposit, you won’t be able to withdraw your funds within 12 twelve months (unless you’re willing to pay a penalty fee). This is one of the most noticeable points of difference between savings accounts and term deposits, and you’ll likely have to pay a fee for early withdrawal.
What does early withdrawal mean?
Early withdrawal refers to a term deposit holder accessing their money before their term has expired. Early withdrawal can refer to either a portion of your deposit or the entire deposit amount.
Is there a penalty for early withdrawal?
Most financial institutions penalise term deposit holders for early withdrawal. The penalty amount will vary from bank to bank, which is why it’s important that you understand your institution’s early withdrawal policy before opening a term deposit.
It’s also important to note that some financial institutions also enforce a notice period before they’ll allow early withdrawal of funds. A notice period means that your financial institution can hold your money for a certain number of days after you make a request to withdraw. This notice period varies but is typically a length of 31 days.
What should I do if I need to withdraw my money early?
If possible, you should do your best to avoid an early withdrawal from your term deposit. It’s best to consider your circumstances before applying for a term deposit and think about whether you’ll need any of the funds within your term timeframe.
The next step in avoiding a penalty fee is to find out if you can withdraw funds from a different account that does not enforce a penalty. However, you might find yourself in a situation where you’re unable to withdraw funds from anywhere but your term deposit.
If you find yourself in this situation, you should first contact your financial institution and find out how to submit an early withdrawal request. If you don’t already know the early withdrawal policy attached to your deposit, be sure to ask before submitting your request.
After you submit your request, your bank or other institution will issue your requested funds either immediately or after a notice period. The timing of your refund will depend on your term deposit’s early withdrawal policy.