Depositing money in banks is considered to be one of the safest ways of investment in today's uncertain times. Investors in stock markets and real estate have learnt it the hard way during the phase of the economic recession. The losses in such risky asset classes can be heavy, and can really affect the confidence of an investor. On the other hand, bank deposits such as time deposits and demand deposits have yielded steady and consistent returns. In case of demand deposits, a depositor is free to withdraw his money whenever he wants without giving any notice to the bank/financial institution with whom the deposit was made. Thus, these are flexible forms of investment. To know exact difference in time and demand deposits, you should study the time deposits vs demand deposits comparison. Now, what is time deposit? Let us know about it from the explanation given below.
Time Deposits
Time deposits, as against the demand deposits, are made for a fixed period of time for a fixed or pre-decided rate of interest. In case of time deposits, there is a date of maturity and banks do not permit pre-mature withdrawal of money. If the depositor needs money urgently, then he will have to pay a penalty to the bank for this activity. Withdrawing money from a time deposit is not as easy as the demand deposits, because the account holder has to give a written notice to the bank for getting the money.
The best part of the time deposits is that the rate of interest is high as the banks are able to use this public money for a longer period of time in this kinds of deposits. Banks have several schemes and plans in which the amount of returns earned by the depositors increase with the time of investment. So, time deposits are to be made with a long term investment perspective. After completion of the deposit period, you either get your money back or can continue the scheme to get even higher returns. The funds in time deposits are protected by Federal Deposit Insurance Corporation. In many countries, the time deposits are also known as fixed deposits or term deposits.
Main Types of Time Deposits
Liquid CD's
Liquid Certificates of Deposits (CD's) are advantageous for investors because here, you get the option of withdrawing your money without any kind of penalty charges. The maximum amount of money which can be withdrawn is decided by the bank.
Traditional CD's
These deposits come with one to five year deposit period and also with restrictions on withdrawal. Penalties are levied on early withdrawal for traditional CD's.
Brokered CD's
Broker bought CD's are fist purchased by your broker and then sold to you, and have deposit period ranging from a week to more than a year.
Time Deposit Types
There are many examples of time deposits which can help you understand this concept. Here are the types of time deposits explained one after the other.
Renewable Time Deposits
Renewable time deposits are those deposits which will get automatically renewed on attaining the maturity date that is given by the bank. Renewable deposits help in multiplying investor wealth and increase their net worth substantially.
One-Time Time Deposits
One-time time deposits are deposits in which the depositor keeps money with the bank for a specific period and then withdraws the money along with the interest amount. Such deposit schemes help investors get big amount of cash, in bulk, which can be used in making big purchases.
Fixed Time Deposits
Fixed time deposits allow their investors to withdraw their entire money before maturing of the deposit, on payment of fees to the bank.
Flexible Time Deposit
Flexible time deposits are more advantageous as compared to fixed time deposits because here, you get higher interest rates from banks,
air griffey max, and also the facility to withdraw your money partly before maturity.
Standard Time Deposits
Standard time deposits are the kinds of time deposits in which you have the freedom of setting maturity instructions and choosing your deposit currency. These are being offered by leading multinational financial institutions.
Term Deposit with Interim Interest
The best part of this deposit is the receipt of interim interest in the period of the deposit. Like in the standard time deposits, you can also choose your deposit currency and set your maturity instructions.
So, these were the several types of time deposits that can generate good wealth in the future. Smart investments made at the right age can help you secure your future financially and enjoy your life. So, take the right decisions and benefit from the exciting offers in the market.