A notice savings account or term deposit is so-called because these accounts do not offer you immediate access to your savings, your savings are generally invested with a financial institution for a fixed period of time. This means you are not able to take money out of the account until the term has expired or without giving your banking institution notice. The amount of notice you must give depends on the institution and the type of term deposit you have entered into, but typical notice periods for these types of account can range from thirty to ninety days. If you do not give the required notice, you will have to pay a charge or a penalty for an 'unauthorised' withdrawal. This could be in the form of loss of interest for a certain period, perhaps equal to that of the required notice period. In most cases if you do not advise your institution to remove your funds from this type of deposit at the end of the term they are usually reinvested for another term until you do.
Many notice accounts generally offer higher or special interest rates than general savings accounts to entice new customers (see Interest Rates). These offers are usually only valid for a certain amount of time and the interest rate is fixed and guaranteed for a specific period, when the offer period ends the capital and interest is repaid, but if you chose not to advise the financial institution to repay the funds invested and leave the account to continue you may find your interest rates may be reduced to well below the market average. So it is important to ensure that you are well aware of the terms and conditions of these types of savings accounts and that you instruct your financial institution clearly on what you wish to happen with your funds. These types of savings account used to be popular because they offered customers unusually high interest rates. Today however, there is so much competition between savings account providers that there is no need to open a notice account or term deposit purely to receive a more favourable interest rate; lots of providers offer high interest rates for instant access savings accounts. However, for the purposes of managing finances it might prove useful for some people to save money which can only be accessed after a certain period of time. As such it can be an ideal investment for someone who requires regular and guaranteed income. However, don’t underestimate their usefulness for any portfolio.
