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Banks get tough on term deposit rules

Banks are getting tough on letting customers make an early withdrawal from a term deposit.

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Banking ombudsman Deborah Battell said banks were introducing policies that outline how much notice a customer must give to make an early withdrawal.

BNZ has a notice on its website that says: “If you’d like an early withdrawal from your term deposit, you must now give us 31 days’ notice prior to the date you wish to break the deposit, unless you are experiencing hardship.”

ANZ says on its website that from 1 April customers will only be able to request an early withdrawal if they give 31 days’ notice or are suffering from hardship.

Ms Battell said the changes were a consequence of the global financial crisis and were designed to make the banking sector more resilient.

“Bank customers are already making complaints to our office. We are expecting that banks will properly implement this new policy and ensure customers are adequately informed,” she said.

Consumer NZ’s head of research Jessica Wilson said banks should be making it clear from the outset what a customer had to do if they wanted to withdraw funds early.

Ms Battell advised bank customers to:

  • think of term deposits like a fixed term loan - you are generally agreeing not to break the contract for a specified period of time
  • try to clearly work out when you are likely to need the funds before fixing the term
  • check out alternatives to term deposits if you think you may need the funds at short notice
  • check out your bank’s policy and terms and conditions with respect to breaking term deposits
  • shop around for the best deal in terms of both rates and policies.