Term Deposit Early Withdrawal: How to Calculate How Much Interest You Actually Lose — Preferential Rates Vanish, Only Time Held Remains
When you urgently need cash and have to break a term deposit you set aside, the first question is usually "how much interest am I going to lose?" Breaking the deposit before maturity means the bank doesn't apply the rate it promised you at sign-up -- it applies a separate early-withdrawal rate the bank sets on its own, and that rate is calculated differently by bank, by product, and even by how long you actually kept the money in. Using one bank's actual formula as an example, here's how the cut really works.
The contracted rate and the early-withdrawal rate are two different numbers
The number you're told when you open a term deposit -- something like "3.2% annually" -- is the contracted rate that applies only if you hold the deposit to maturity. If you can't hold it and pull the money out early, that rate doesn't apply as-is; instead the account is recalculated using the early-withdrawal rate that was disclosed at sign-up. The two rates have different names and different numbers, but they're often printed in small type somewhere on the passbook or sign-up screen, so they're easy to miss when you're opening the account.
Preferential rates mostly disappear the moment you withdraw early
If you were earning a preferential rate on top of the base rate by meeting conditions like direct-deposit payroll, automatic bill payment, or card spending targets, that preferential portion almost always disappears on early withdrawal. Even if you signed up at "3.2% annually (2.7% base + 0.5% preferential)," the early-withdrawal calculation is commonly based on the base-rate structure alone, with the preferential portion stripped out. The larger the share of preferential rate in a product -- as is often the case with special limited-time deposits -- the bigger the gap between the interest you expected and the interest you actually receive on early withdrawal.
The actual formula -- one bank's structure as an example
The exact ratios differ by bank, but a common structure is base rate × an applied percentage that varies by how much time has passed × (days held ÷ days in the full contract term). Take one commercial bank's term deposit terms as an example: if you withdraw early after holding the deposit for three months or more but less than six months, it recognizes only 50% of the base rate, and then multiplies that again by the ratio of days you actually held the money to the full contracted term. In other words, the rate is cut in half, and on top of that, the earlier you withdraw, the more the days-held ratio shrinks it further -- a double reduction. That same bank also guarantees a minimum of 0.5% annually as long as you held the deposit for at least three months, as an exception clause.
Under three months, expect close to no interest at all
Most banks apply their lowest percentage in the under-one-month or under-three-month bracket after opening. In this bracket, the applied percentage is often set close to 0%, so in practice you often get back close to just your principal. Conversely, the applied percentage rises in steps the closer you get to maturity, so if you need emergency cash just days before maturity, it can be worth comparing a deposit-backed loan or another option before withdrawing early. Banks also draw these brackets differently -- some use four brackets at 1/3/6/9 months, others use just three brackets at 3/6/11 months.
The numbers make the difference clearer. Say you have a one-year term deposit at 3.2% annually (preferential rate included) for 10 million won, and you break it at the six-month mark. If you'd held it to maturity, the pre-tax interest would be roughly 320,000 won, but if the six-month early-withdrawal rate lands at around 50% of the base rate as in the example above (assuming the base rate is 2.0% annually once the preferential portion is removed), the pre-tax interest shrinks to roughly 50,000 won. Even though you held the money for the same period, losing the preferential rate and having the applied percentage lowered on top of it shrinks the interest to about a sixth of what you expected. The actual loss varies by bank and product, but if you assume "it'll only be cut in half," you may be surprised by interest that's far smaller than it feels like it should be.
What the bank association's disclosure can and can't tell you
The Korea Federation of Banks' consumer portal lets you compare each deposit product's base rate and preferential-rate conditions on a pre-tax basis. However, the portal often doesn't show the specific early-withdrawal formula at a glance, so to get an exact figure you typically need to check the product detail screen in your bank's app or contact customer service directly. Even products with the same name, "term deposit," can have different early-withdrawal rules from bank to bank, so estimating your loss from the rate shown on the portal alone can leave you off from the real number.
Three things to check before you withdraw early
First, calculate how many days have passed from your sign-up date to today alongside the full contract term in days. Second, check how much of your contracted rate at sign-up was made up of the preferential portion. The larger that preferential share, the bigger your loss from early withdrawal. Third, ask the bank whether the product allows a partial withdrawal instead of closing the whole account. If partial withdrawal is supported, you can pull out only the amount you need and keep the contracted rate on the rest. When you ask a teller or call center, rather than just asking "what's the early-withdrawal rate," it helps to ask the more concrete question, "if I withdraw today, how much pre-tax interest will I actually get?" -- that reduces calculation mistakes. More banks now show the estimated payout on early withdrawal right on the deposit detail screen in their app, so checking the app before you call can also save time.
If early withdrawal feels too costly, weigh the alternatives too
If the interest loss feels too steep, there's also the option of borrowing against the deposit instead of closing it. The loan rate is typically set around 1 to 1.5 percentage points above the deposit rate, and the loss from that is often smaller than losing the entire contracted rate through early withdrawal. Keeping your spare cash split across parking accounts or CMAs lets you avoid this early-withdrawal calculation altogether, and knowing ahead of time that deposits and installment savings calculate interest differently makes your next sign-up decision easier. If you have an old deposit you set up and forgot about, checking for it through a dormant-deposit search is worth doing first.
Steps to follow
① Calculate the number of days elapsed between your deposit's sign-up date and today. ② Check the exact early-withdrawal rate for that product through your bank's app or customer service. ③ If the contract included a preferential rate, ask whether that portion is excluded on early withdrawal. ④ Check whether the product allows partial withdrawal, and consider pulling out only what you need first. ⑤ If the loss is large, compare alternatives such as a deposit-backed loan that let you keep the deposit intact while raising cash.
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