How does the Volt Bank closure affect you?

Volt Bank announced it is closing shop, telling customers they need to clear out their funds by July 5, 2022.

Volt was the first neobank to secure an unrestricted licence to bill in January 2019, after the Australian Prudential Regulation Authority (APRA) gave the start-up their blessing.

The APRA unrestricted licence gave Volt the opportunity to launch a range of savings and bank accounts, and term deposits. The licence meant that Volt could start accepting deposits from customers above $250,000 and hold a maximum of $2 million in total deposits. 

Essentially, the training wheels were off – Volt was an official authorised deposit-taking institution (ADI). And, for a while, things looked good.

Volt Bank had plans to expand their services into the home loans market in 2024. However, an unsuccessful attempt to raise the necessary capital in February 2022, driven by market conditions and investor-hesitancy, short-circuited Volt’s plans.

Volt intends to hand back their banking licence and cease operating as an ADI. But what happens to existing customers?

As Australia’s financial safety regulator, APRA will closely monitor the process to ensure funds are returned to Volt depositors in an orderly and timely manner.

Volt announced it will begin closing accounts down on July 5, 2022. This means that Volt customers only have a few days to clear out their accounts and move their money to a new bank. 

However, Volt won’t close an account which still has funds in it – so don’t worry about losing your money if you can’t get around to clearing your accounts out. 

The company also said that once your account is closed, Volt “will issue you, via email, a final closed account statement which will provide you with a record of interest paid this financial year, for your tax records.”

Closing shop for Volt is no small task when charged with returning over $100 million in deposits to their customers. However, APRA is keeping a close eye on the whole ordeal, announcing:

“As Australia’s financial safety regulator, APRA will closely monitor the process to ensure funds are returned to Volt depositors in an orderly and timely manner.

“In addition to the return of deposit process, Volt’s depositors remain protected by the Financial Claims Scheme (FCS).”

Volt has set the interest rates on all their accounts to 0% as of 29 June, 2022. Any interest earned before that date was reportedly paid out by Volt into customers’ accounts when they changed the interest rate.

As part of closing procedures, Volt changed the interest rates on their Spend and Save accounts to 0%, with any interest earned before June 29 being paid to customers on July 1, 2022. 

Existing Volt customers will need to find a new savings account and a new everyday banking account, and transfer their funds over before July 5, 2022.

Volt announced that there will be no break fees for those who currently hold term deposits with the neobank.

As the interest rate for all Volt Bank accounts is now set to 0%, you won’t earn any interest on your investment, so it may be worth finding a new term deposit rate to lock into as soon as possible. 

It is unclear whether Volt will pay any ‘theoretical’ interest earned on term deposits, as in the case of a term deposit which was one or two days out from maturity. For more information, contact Volt Bank Customer Care on 13 VOLT (13 8658) if you're in Australia. If you're overseas, call +61 2 8294 8474. 

In the meantime, check a few of these competitive term deposit rates from the Mozo database which you can switch over to now.