Breaking a term deposit early

From 1 January 2015 APRA’s liquidity standard APS 210 gave banks favourable treatment for term deposits that can only be withdrawn early on 31 days’ notice. ASIC granted relief so these products could still be sold as basic deposit products, on condition that customers "understand the new requirement to give 31 days’ notice to ‘break’ their term deposit". Moneysmart says you "may also need to give up to 31 days’ notice". The rules encouraged notice products; they did not impose one rule on every term deposit, so the notice, if any, is set by each product.

Where a product requires notice, when the money arrives depends on its withdrawal terms, the maturity date and any hardship provision. Some products waive the notice in financial hardship; the terms say when.

Moneysmart warns you "may only receive a proportion of the interest earnt, or none at all". The reduction is set out in each product’s terms, and often grows with how much of the term is left; some products charge a fee as well. Banks that publish their conditions in their Consumer Data Right feed have them under conditions or features on their page here.

Check the maturity date; if it is close, waiting may cost less than breaking. Check whether the product allows a partial withdrawal, which some do. Check whether a hardship provision applies. And work out the cost: it depends on the amount withdrawn, how much of the term has run and the product’s adjustment formula.

Money that may be needed at short notice is easier to reach in a savings account. Several smaller deposits let one be withdrawn early while the others run on, subject to each product’s terms, and a ladder brings a maturity date around at regular intervals.