when interest rates decrease consumers are encouraged to borrow and spend more thereby stimulating the economy in a low interest rate environment demand for term deposits can decrease since investors can typically find alternative investment vehicles that pay a higher rate 
typically interest rates should be proportional to the time until maturity and the minimum amount of principal lent to the credit union or bank in other words a six month term deposit will likely pay a lower interest rate than a two year term deposit investors not only receive a higher rate for locking up their money with the bank for extended periods but also should earn a higher rate for large deposits for example a jumbo cd which is a term deposit above 100 000 will receive a higher interest rate than a 1 000 cd opening or closing a term depositterm deposits are also called certificates of deposits customers can view the conditions of the term deposit via a paper statement this statement includes the required minimum principal amount the interest rate paid and the duration or time to maturity as agreed by the bank and the depositor if a customer wants to close a term deposit before the end of the term or maturity the customer will be subject to a penalty this penalty may include the loss of any interest paid on the deposit account until that point closing the cd before the term ends lets the customer take back the principal amount invested but with the forfeiture of the earned interest the penalty for withdrawing prematurely or against the agreement is stated at the time of opening a term deposit as required by the truth in savings act 5sometimes if interest rates have risen considerably it might be worth it for a customer to close the term deposit early take the penalty for the early withdrawal and reinvest the funds elsewhere at a higher rate it s important to be sure that the alternative rate is high enough to more than compensate for the original rate on the term deposit plus the cost of the penalty 