What Happens When a Term Deposit Matures?

Your term deposit's end date arrives faster than you'd think — and what happens next depends entirely on what you told the bank when you opened it. Here's what to expect, and how to avoid losing weeks of interest to a bad default.

The maturity instruction you gave (or didn't)

When you opened your term deposit, you were asked what should happen at maturity. Most Australian banks offer three options: pay the funds and interest into a linked transaction account, roll the full amount (principal plus interest) into a new term at the prevailing rate, or roll over the principal only and pay out the interest.

If you don't actively choose, the bank applies a default — and that default is usually an automatic rollover into the same term length, at whatever rate the bank is offering on that day. That rate is very often lower than what specials or other lenders are paying, because banks count on inertia to keep your money parked at standard rates.

The grace period — and why it matters

Most banks give you a short grace period, typically 7 to 14 days, after maturity to change your instructions or withdraw without penalty. During this window you can usually move your funds, switch to a different term, or take the cash out and shop around — all without the early withdrawal break costs that would normally apply.

The catch: if you miss that window, your funds are locked into the new term under the bank's standard conditions, and breaking it early means starting the early withdrawal process (and the interest reduction that comes with it) all over again.

What to do before your maturity date

Mark the maturity date in your calendar the day you open the term deposit — most banks send a reminder letter or email roughly two weeks out, but don't rely on it landing in your inbox at the right time. When it arrives:

• Check the rate your bank is offering for a fresh term of the same length against current market rates
• Decide whether you want to keep the same term, shorten it, lengthen it, or withdraw the funds entirely
• Contact the bank (or use online banking, where available) to confirm your instruction inside the grace period

Why shopping around at maturity pays off

Term deposit rates move constantly, and the gap between a bank's loyalty rollover rate and the best rate on the market for the same term can be significant — often half a percentage point or more on a like-for-like term. On a $100,000 deposit, that's hundreds of dollars in interest over a 12-month term, simply for taking ten minutes to compare before your old term rolls over.

This is general information, not financial advice.

What to do right now

If you have a term deposit maturing in the next month, check today's best 12-month term deposit rates and compare them against what your bank's rollover rate is likely to be. Ten minutes now could be worth hundreds of dollars over the life of your next term.