Whilst the major banks are currently offering some fantastic rates on their Term Deposits, it is important to be aware of the possible fall out that may result when your term expires, particularly if you are rolling over the funds for another term.

A quick scan of the current promotions shows that at any one time the banks are offering Term Deposits with interest rates from as high as 7.75%, even up to 8.20%. It is important to note that these rates are only available for the nominated terms, as specified by the individual institutions. 

Whilst it is great to take advantage of these opportunities whilst they are available the thing to be aware of is what can potentially happen once the term has matured. The promotional rate that applies when you originally sign up is for a set term, and applies only to that term. If you choose to roll over your funds at the time of maturity, either the principal amount or the principal as well as the interest, chances are that the rate for the new term will be significantly lower than your original promotional rate.

In the current financial climate, where the investment market is quite volatile and consumers are increasingly seeking more and more credit, the banks need to find ways in which to raise and maintain funds for their institution. They catch out unsuspecting investors by getting their money in the door with great the promotional rates, but do not make a conscientious effort to explain that upon maturity of the term that promotional rate will usually not continue. They rely heavily on the fact that most people will not investigate these points at the time of rolling over and so will not realise until it is too late that the change in rates can potentially dramatically affect their final total. 

The important thing to remember in order to maximise your returns from Term Deposits is not to “set and forget” them. By staying on top of the current promotional offers and being completely aware of the changes that will occur when rolling over your term you will ensure that you get the best return on your investment.