Premature withdrawal
Taking your money or investment out of your fixed deposit scheme prior to the maturity date of that scheme or taking money out of retirement savings account before maturity period is usually termed as premature withdrawal.
Advantages of Premature Withdrawal
- You can use that money elsewhere which gives you higher interest rate than the interest rate given by your fixed deposit.
- You can meet your urgent monetary needs by withdrawing from your investment scheme.
Disadvantages of premature withdrawal
- Banks usually charge you with a penalty for removing your money from the fixed deposit scheme which usually is around 1%. Say, you have invested in a fixed deposit scheme for 10 years with a fixed interest rate of 10% and if you want to withdraw prior to maturity period, say in 3 years then banks may only offer you 8% for the three year period.
- Different banks charge you with different penalty charges.
It is advisable not to take out your money out of a fixed deposit scheme if it’s in final stage or nearing maturity period because, the penalty charges may defeat the purpose of your high interest elsewhere. And you also have an option of taking loan from the deposited amount so, please consider before acting.
It would be more helpful if someone could tell us, how the banks decide the interest rate, before maturity. Yes i agree we investment for savings but sometimes there is an unforeseen event, and he have nothing else, but to withdraw from the plan we initially decided. Do the banks tell us before hand (or time of investment) what if we break it in 3-5 yrs, what would be the rate of interest, and does that fluctuate as well. This piece of information would be quite helpful.
Life is full of surprises and we can´t do nothing about. However, we can do a lot, how are we going to react on different challenges coming our way. It is good to know that some other options are available in case of emergency. The proverb says, Ë?Where there´a will, there´s a way.Ë? , and articles like this, show us the way.
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