Term deposit penalties

If you want to withdraw funds from a term deposit before it matures, you’ll likely have to give up some of your interest or accept a lower rate.

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If you need to access the money in your term deposit, withdrawing money early can be an expensive exercise. Fees and interest rate reductions often apply to early withdrawals from term deposits, so you need to make sure you’re aware of what those penalties are before deciding to make a withdrawal.

Term deposit penalties from Australian banks

Here's what to expect from the Big Four banks if you choose to break your term deposit before it reaches maturity.

Commonwealth Bank

If you need to withdraw money from a Commonwealth Bank term deposit before the end of the term, you will need to give the bank 31 days' notice. In addition to a $30 prepayment administration fee, you will also be hit with a prepayment adjustment.

The prepayment interest adjustment applied to your account varies according to the percentage of the original term that has elapsed. The interest rate adjustment is calculated on the term deposit balance current as of the prepayment date.

Percentage of term elapsedAdjustment to be applied
0% to less than 20%90%
20% to less than 40%80%
40% to less than 60%60%
60% to less than 80%40%
80% to less than 100%20%

For example, if your funds are invested for half of the agreed term, the prepayment adjustment to be applied will be 60%. So if the agreed interest rate when you opened the term deposit was 5.00% p.a., the interest rate you will earn on the amount that you have withdrawn early will be 40% of the interest rate agreed at the start of the term, in this case 2.00% p.a. Let's assume you have $5,000 invested in a 12-month term deposit and you wish to withdraw the entire amount:

  • If you waited until maturity, you would earn $250 interest.
  • If you withdrew funds halfway through the term and were hit with the rate adjustment, you would only earn $100 interest.

Westpac

Westpac also requires 31 days' notice when you wish to withdraw funds ahead of schedule, with an interest rate reduction applying based on the same schedule outlined in the above table. In addition, no interest will be paid if a withdrawal is made less than seven days after the term begins.

ANZ

The early withdrawal fees and interest rate reduction on ANZ term deposits are the same as with Commonwealth Bank, but the 31 days' notice period doesn't apply. You can instead ask to withdraw funds immediately, with all requests responded to within two business days.

However, ANZ also offers the Advance Notice Term Deposit which, as the name suggests, does require you to provide 31 days' notice before you can withdraw funds. In return, an Advance Notice account provides higher interest rates than ANZ's ordinary term deposits.

NAB

You'll need to give 31 days' notice if you want to withdraw money early from an NAB term deposit, while you'll also be paid a reduced interest rate on the amount you withdraw. This rate is calculated based on the percentage of the term that has elapsed, as outlined in the Commonwealth Bank prepayment adjustment table above.

Other fees may also apply, but NAB says these vary depending on the amount you withdraw and on changes to the bank's cost of funds since you opened your account. Contact NAB for more details.

ING

If you choose to close an ING term deposit account early, your funds will be transferred to the nominated linked account 32 days after you get in touch with them, or the next business day where applicable. If you have less than 31 days left on your term, you will not be able to access funds until maturity. However, these times may be waived in the case of financial hardship. If you close your account before maturity, your interest rates will be reduced based on how much time was left in your term, as per the Commonwealth Bank table above. You cannot make partial withdrawals, and can only empty the account.

Term deposits you can compare today

Name Product 3 Mths p.a. 4 Mths p.a. 5 Mths p.a. 6 Mths p.a. 7 Mths p.a. 12 Mths p.a. 24 Mths p.a.
Citibank Term Deposit $10,000
0.40%
-
-
0.40%
-
0.40%
-
Suited to customers with deposits between $10,000 and $249,999.
This term deposit is for new Citibank customers only
MyState Bank Online Term Deposit
0.30%
0.30%
0.25%
0.50%
0.35%
0.65%
1.00%
Single or joint account-holders can apply online with MyState's online application process.
Pay no account setup or ongoing fees and choose a term length between 3 months and 2 years, with interest paid at maturity.
Rabobank Term Deposit
0.45%
-
-
0.75%
-
0.75%
0.50%
Suited to customers with deposits between $1,000 and $2,000,000.
With a Rabobank Term Deposit you will receive a competitive rate on your deposits and the choice of a 1, 3, 6, 9 or 12 month term.
Judo Bank Term Deposit
0.88%
-
-
0.97%
-
1.12%
1.20%
Earn a 0.10% p.a. loyalty bonus when you roll over your term.
The Judo Bank Term Deposit term lengths range from three months to five years. Minimum opening deposit is $1,000. No account-keeping or set-up fees to pay.
ME Term Deposit
0.40%
0.40%
0.45%
0.50%
0.50%
0.60%
0.60%
You can link the ME Term Deposit with the transaction account of your choice, at any other Australian financial institution.
Choose whether to have interest paid annually, monthly or at maturity.
Bank of Queensland Term Deposit ($5,000 - $249,999)
0.30%
0.20%
0.20%
0.35%
0.25%
0.45%
0.70%
ING Term Deposit
0.05%
0.05%
-
0.07%
0.10%
0.22%
0.25%
Pay no fees for your term deposit, and choose a term length from three months to two years.
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What term deposit penalties apply if I withdraw before maturity?

The first thing you need to realise before you make an early withdrawal from a term deposit is that you may have to give advance notice to your bank, usually 31 days. This means that if there’s less than a month remaining on your term, you won’t be able to access the funds in your account until maturity. However, some banks and term deposits do allow early withdrawal requests to be processed immediately, so you’ll need to check the fine print.

Penalties apply when you break the fixed investment period of a term deposit, but the penalty fees are calculated differently from one financial institution to the next. They also have different names depending on your bank, such as prepayment penalties and early withdrawal fees.

Some banks will deduct a percentage of your interest rate based on how much of the term still remains – for example, if the interest rate is 3.50% p.a. but the penalty is 2.00% p.a., you would only earn 1.50% p.a. on your balance.

Others will charge a break fee calculated on a wide range of factors, including the bank’s current interest rates, the rate on your account, and how much money you want to withdraw. You can find more details on the fees and charges that apply to your term deposit in the relevant terms and conditions document from your financial institution.

It’s also worth pointing out that minimum balance limits often apply to term deposits. So even if you are only withdrawing a partial amount, if this reduces your account balance to below the minimum limit, your account could be automatically closed and the interest rate reduction could apply to the entire balance.

Why do banks impose term deposit penalties?

The fixed nature of a term deposit has benefits for banks as well as for customers. When you agree to invest a specific amount of money with a bank for a set period, the bank is more than happy to receive those funds because it can lend them out to home loan borrowers in the knowledge that you won’t need to access your money until the deposit matures.

However, when you decide to break your term deposit and withdraw funds ahead of schedule, you’re breaking the agreement you have with your bank and it will impose penalties to help cover any funding shortfall.

Meanwhile, the 31-day notice period imposed on many term deposits was introduced in 2015 as part of the liquidity coverage ratio (LCR) under the Basel III reforms. These reforms are designed to reduce financial stress on banks, and requires banks to hold enough assets to see off 30 days of financial turmoil.

Top tips about term deposit penalties

No legal requirement

There is no legal requirement for your financial institution to break your term deposit early, even if you request for this to happen. This may vary depending on the contract you have in place with your bank, but in most cases you will need your provider’s approval before you can withdraw funds early.

The financial hardship rule

If you’re experiencing financial hardship and need urgent access to funds in your term deposit, your bank may waive the 31 days’ notice requirement that applies.

Plan ahead

Before you open a term deposit, consider your future financial needs and whether you are likely to need to access your money before maturity. While it’s impossible to predict the future and the emergencies that may arise, you may decide that you may be better off opening an online savings account that provides easy access to funds whenever you need.

Make use of cooling-off periods

Some providers have cooling-off periods that begin immediately after you open a term deposit and run for a short period, allowing you to close your account without incurring any penalties. If your term deposit does include a cooling-off period, make use of this time to consider whether it is the right account for you.

Consider other opportunities

If you don’t want to pay the penalties imposed for breaking a term deposit early, make sure you consider all the opportunities available to find the money you need. Perhaps you could borrow the money from a family member?

Partial withdrawals without penalty

Some term deposits allow you to make a partial withdrawal from your account without incurring a penalty. Keep an eye out for these accounts when comparing term deposits.


Before you open a term deposit, make sure that you’re fully aware of any penalties that will apply if you need to make an early withdrawal.

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