The word deposit has a lot of significance in today’s world we live in, our lifestyle and a consumer led life has influenced us in lot of ways that it is practically impossible to come out of it. Money for us is worth every penny, and at times our monthly salary might not be sufficient to make our wishes and dreams come true, which is when you will need another saving called term deposit.
Term Deposit
Term deposit is a financial scheme at financial institutions for a fixed tenure or term and a fixed interest rate. While they are generally short term but up on maturity it ranges from a few months to a few years in the bank. The investor or depositor can only withdraw the money once the tenure is complete and the account has been matured. Term deposits are normally safe and can be opened in banks, credit unions and insurance corporations.The interest rate for term deposit depends on the amount invested and the time period, for longer deposit tenure the rate of interest can be higher. Term deposit may not be affected if the RBI decides to lower or raise the rate of interest.
Types of Term Deposits
There are different types of term deposits available some of which are as listed below:
- Fixed deposits – Fixed deposit is where you get a fixed rate of interest at fixed intervals.
- Recurring deposits – Recurring deposit is where you have to pay a fixed amount every month for a fixed period of time and upon reaching maturity you will gain the total amount along with the accumulated interest. The tenure varies from 6 months to 10 years.
- Re-investment deposits – In re-investment deposit, the interest is compounded on a quarterly basis and paid to the depositor upon reaching maturity along with the principal amount deposited at the opening of the account.
- Short term deposits – In short term deposits, invest your money for a short period of three to six months with a guaranteed rate of interest and spend it wisely upon reaching maturity. Short term deposit is a good catch for those who want fast money in a short period of time.
- Long term deposits – In long term deposits, you earn a higher interest rate for a longer time, benefits investors who wish to deposit the money for a longer time. You can only withdraw the returns upon maturity or else, you will have to incur a penalty charge for pre-mature withdrawal.
- Rollover term deposits –Here, you have the option to roll over your investment in the account for another term, but make sure you check the interest rate before deciding to rollover.
