Menu
A time deposit, also known as a term deposit, is a deposit in a financial institution that has a set maturity date or duration to maturity, which is referred to as the “term.” Time deposits are distinct from call deposits, such as savings or checking accounts, which can be taken at any time with no penalty or notification. Though they don’t have a set maturity date, deposits that demand notification of withdrawal are functionally time deposits.
A time deposit, unlike a certificate of deposit or a bond, is normally non-negotiable; it cannot be transferred by the depositor, therefore depositors must deal with the financial institution if they need to pay out the deposit early.
The bank can use the proceeds from time deposits to invest in higher-yielding financial products. Time deposits are exempt from bank reserve requirements in several nations, including the United States, because the cash cannot be withdrawn at short notice. Time deposits are guaranteed by the government or covered by deposit insurance in several nations.
Time deposits usually yield interest, which is usually fixed for the time and payable at maturity, though some, especially with longer-term deposits, may be paid periodically over the term. In general, the greater the interest rate offered, the longer the term and the larger the deposit amount.
A time deposit’s interest rate is higher than that of an at-call savings account, but it is lower than that of riskier investments like stocks or bonds. Some banks provide market-linked time deposit accounts that have the potential to earn better rates while still guaranteeing the principle.
The principal can be paid back to the depositor (typically by a deposit into the depositor’s bank account) or rolled over for another term upon maturity. Interest can be deposited into the same account as the principal, transferred to another bank account, or carried over to the next term with the principal.
Money placed can usually be withdrawn before maturity, although there will usually be a hefty penalty.
https://en.wikipedia.org/wiki/Time_deposit
© 2021 All rights reserved