Term deposit: what it is, tasks, and how to choose it - GovtVacancy.Net

Term deposit: what it is, tasks, and how to choose it

In the banking sector, time deposits exist and are often misunderstood by citizens. That is, a person deposits money in a bank at interest for a given period.

Time deposits are all standard deposit programs offered by banks to individuals and organizations. Almost all banks whose offers offer the opening of time deposits. And these programs can be used by everyone.

An alternative option is a demand deposit. This is a deposit account that is open indefinitely. In other words, there is no specific period in which the interest rate will stop operating, but the interest on this type of product is almost always 0.1% per year. Most of the time, if you withdraw a time deposit before the due date, the rate is recalculated to the demand schedule rate.

Term deposit tasks

Many Russian citizens open fixed-term accounts in banks, that is, they deposit personal funds in a bank at interest. There are several goals for such investments:

º Receiving a profit: If we are talking about a large amount, the profit can be more or less acceptable. But in general, the size of deposit fees averages 5-6% per annum, so there is no talk of serious income

º Save money from inflation: When choosing between keeping money under your pillow and a deposit, it is better to choose a deposit. Rates are always higher than the level of inflation, so capital will definitely be spared from their influence

º Using the deposit as a savings tool: Many of those who save money for some important purchases open a term deposit for this. So the client protects the funds from inflation, and receives a small income. Also, keeping funds away from home doesn't allow you to "accidentally" spend them.

Important Additional Options

Term deposits are not just programs to save and increase one's own funds. Studying accommodation options, a person comes across unfamiliar and unfamiliar terms. Namely:

º Capitalization: Important option. If it is connected to the deposit, the interest accrued in the specified period will be added to the deposited amount. This means that each period will be subject to a higher interest limit, and the yield will increase. But often banks resort to a trick: they slightly reduce the rate when they connect the capitalization;

º Extension: When you connect after the end of the placement period, the deposit is automatically extended for the same period. But at the same time, the client can come and take the money at any time, and the interests of the first installment are not exhausted. If the extension is not connected, the money is simply transferred to the sight account on the specified date.

How to choose a term deposit?

First, decide on the options you need. Based on this, choose a bank and a program. Also, if you want to receive interest on a regular basis, watch how often it is accrued. By choosing this interest payment option, the accumulated income will be regularly credited to a separate account or card.

It is important to look at the bank itself. It must be a trustworthy organization. All citizen deposits are insured. If the bank closes or loses its license, the depositor receives a full refund.

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