Term deposit is one of the easiest ways to increase funds and one of the popular banking products for the individuals. Let's consider what term deposits are, their differences and features compared to other types of deposits.
What are time deposits?
As the name implies, a term deposit is the placement of funds in a financial institution at interest for a clearly fixed term. The period of storage of funds and the date of return of the deposit are determined in the bank deposit agreement, which is signed between the bank and the depositor. The bank is obliged to return all deposited funds to the depositor immediately upon the specified deposit expiration date, however, it is impossible to withdraw the term deposit earlier than stipulated in the contract.
The opposite of time deposits are demand deposits, that is, accounts for the indefinite storage of funds, as well as bank cards with interest on the balance. All of these products provide for the bank to pay interest on the depositor's funds, but the return on term deposits is always higher than on open-ended deposits, because term deposits are more predictable for the bank.
Withdraw a term deposit early? It is possible?
This is permissible only if you placed a deposit with the possibility of early termination. Then the bank is obliged to return your funds at the first demand. If you estimate a high probability that you will need the money before the end of the term of the deposit, then choose an offer with the option of early closing of the deposit and refund. Premature termination of the deposit causes the payment of interest at a penalty rate, which will be significantly lower than when the deposit is returned at the end of the term.
If you want to have access to funds at any time, but at the same time receive a guaranteed income, fixed deposits are not the best option, in which case you should pay attention to a product such as a card with interest on the balance.
Can the bank extend the term deposit for a longer period?
Most of the deposit programs provide for the possibility of automatic extension, i.e. extending the term deposit for a new term. This option must be specified in the terms of the deposit on the bank's website, and then fixed in the bank deposit contract. You can always refuse the extension - both at the time of placing the deposit and during its validity. And you can always check the information about whether your deposit has been extended in online banking, the bank's contact center or in a branch.
In advance, before the end date of the deposit, make sure whether or not there is an extension, so that there are no misunderstandings and unpleasant situations later. If you forgot that you canceled the extension on your deposit with interest payment at the end of the term and do not contact the bank for a deposit for another year, your money will remain in the bank for free all this time. The opposite situation is also possible: when you think that you have placed a deposit without extension, after its validity ends, you come to the bank to collect your money, and you find that your deposit was automatically extended for another year a week ago.
Remember, a term deposit is your obligation to keep money in the bank for the entire duration of the deposit in exchange for deposit interest.
Is the term deposit rate fixed or variable?
The deposit rate is fixed at the time of signing the contract and remains unchanged throughout its term, so you are guaranteed to receive the return on the deposit that is specified in your contract. The only thing that the bank can change during the validity of the term deposit are the tariffs for servicing the current or card account. For example, change the cost of SMS notifications or cash withdrawals from ATMs. You should periodically review the change in tariffs for your products on the bank's website. Therefore, time deposits are an opportunity to fix income for the entire term of the deposit, while for demand deposits and bank cards, not only service tariffs, but also interest on balances may change regularly until they are completely canceled.
Term deposits are a profitable way of saving
Time deposits have a number of advantages over other types of bank deposits, as they:
- bring a significantly higher yield compared to demand deposits and interest on the account balance;
- allow you to fix the yield for the entire term of the deposit, in contrast to demand deposits and interest on the account balance;
- protect funds from any fraudulent actions, the risk of which is significantly higher for ordinary bank cards.
Term deposits are a fixed attractive yield and protection of funds, term deposits in Agroprosperis Bank are reasonable and profitable savings in a reliable bank with foreign capital from the USA and Europe.
