What Happens When You Withdraw from Your Time Deposit Before Its Maturity?

When you enter a time deposit contract with the bank, you won’t be able to withdraw your money until your time deposit matures. However, there are some cases where it simply cannot be helped, and you need your money ASAP.

For instances like this, you can decide to withdraw your time deposit before its maturity. While this option is available to everyone, we don’t recommend doing so because it can lead to some drawbacks on your financial journey.

But what exactly are the cons of withdrawing your time deposit before its maturity? We discuss this below.

How Does a Time Deposit Work?

In time deposits, the bank uses your money for its various services – more specifically, its loans. That’s how the bank can give you a higher interest on your money because it earns from the loans of these interests.

When you enter a time deposit contract with the bank, your money is locked in until its maturity period. So, it’s critical that you read through these contracts and make sure that it meets your time horizon.

Each time deposit is protected by the Philippine Depositors Insurance Corporation (PDIC) meaning your capital is safe.

Is a time deposit a good investment? Yes. It’s a secure financial instrument that yields good returns on your investment. There are also numerous products available that vary in time giving each depositor a unique opportunity to grow their wealth.

Can I Withdraw a Time Deposit Before Maturity?

Yes, you can withdraw your time deposit before its maturity. But there will be some drawbacks to this, this is why we recommend leaving it as a last resort because you can get charged bank fees and earn less interest.

The losses you can incur are exactly why we recommend that you make withdrawing your time deposit a last resort. In this section, we dive further into these cons:

Penalty Fees

When you withdraw your time deposit before its maturity, your bank will charge you fees. Leading to less returns on your capital investment.

Loss of Interest

You won’t get the full interest that you were supposed to get when you withdraw your money early. Unfortunately, when you cancel your contract with the bank, should you choose to enter a time deposit contract again, the bank may have lower interest rates.

Lost Opportunity

A difference between time deposits and UITFs is that time deposits won’t allow you to withdraw just a portion of your money. You’ll need to take out your entire investment so, you let go of this opportunity completely.

How are Early Withdrawal Fees Computed?

Pre-termination rates can differ according to when you end the contract. The pre-termination formula is as follows:

(Principal Amount x Pre-Term Rate x Days Lapsed) / 365 days = Pre-Termination Rate

If the contract was ended in the first half, it’s 25% of the contracted rate. On the other hand, if it was ended in the second half, it’s 50% of the contracted rate.

What Do I Need to Do to Withdraw My Time Deposit Before Maturity?

Depending on your financial institution, you may need to give notice before you get access to your funds. Some banks will need at least 31 days’ notice before your capital is accessible.

For RCBC’s time deposit, you can terminate your time deposit online. All you need to do is pre-terminate your time deposit through RCBC’s online channel. Review the pre-termination fees and confirm the action. Upon confirmation, your funds will be automatically transferred to your nominated account.

Your nominated account is the same one you used to open your RCBC account. So, it’s a hassle-free process and you instantly get access to your money as well.

Complete Control Over Your Investments

We hope that you’ve learned everything you need to know about withdrawing your time deposit before its maturity. We’ve given you the formulas, the cons, and the steps on how you can do this, so you have complete control over your finances.

With RCBC’s time deposit, you can withdraw your money anytime and you also gain access to it instantly. If you decide to put your money back into a time deposit again, you can do so from the app.

In short, full control over your finances is in the palm of your hand with RCBC.