7 Benefits of a Term Deposit Account

by Vinaya HS on April 24, 2016

in Finance

Thanks for visiting Capital Advisor. I frequently update this blog to cover various topics on personal finance such as investment strategies, financial products that you should buy and ones that you really should stay away from, financial calculators, emerging themes such as early retirement and financial independence, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

The following post is a sponsored post.

As indicated by the name, fixed or term deposits have a pre-determined tenure and interest rate for the principal amount invested in these accounts. The primary objective of fixed deposits is to help investors mobilize investible surplus and earn a higher interest rate.

In addition, these kinds of deposits are safer investment avenues because the maturity amount is fixed at the time of opening the account. This means that investors are safeguarded against market fluctuations or interest rate changes. Compared to a regular savings account, returns on fixed deposits are higher making these an excellent investment option.

Benefits of Term Deposit

1. Lock-in period – A term deposit cannot be withdrawn until maturity. If you need to close this account before the end of the term, you will have to incur certain penalties. This discourages premature withdrawals and encourages individuals to save, while also helping with accurate financial planning.

2. Higher returns – Instead of leaving the surplus in your savings bank account, this amount can be transferred into a term deposit. This allows you to earn a higher rate of interest on the surplus amount, which can be a step towards making your money work for you.

3. Safe investment – The interest rate is determined at the time of opening the account, which means that irrespective of any changes to market rates, you are assured of receiving the predetermined maturity amount. The bank deposit interest rates vary from one institution to another, so it is advisable to check these before opening your term deposit.

4. Meet financial goals – Because you are aware of the exact amount you will receive on maturity when you apply for term deposits, you are able to plan your finances in very precise manner. These investment avenues can be useful in meeting medium to long-term financial objectives.

5. Flexibility – You can choose to receive the interest on term deposits at their preferred time intervals. You can opt for monthly or annual payout or decide to withdraw the entire amount on maturity.

6. Variable duration – These deposits can be opened for a minimum of 7 days or for a maximum of 10 years. This means that you can enjoy great flexibility in the duration of investments, based on personal needs and preferences.

7. Multiple accounts – There is no limitation on the number of deposit accounts that you can open. You can setup new accounts each time you have an investible surplus to help grow your wealth and meet future financial goals.

Term deposits earn interest with a compounding effect on the initial principal invested. This entire amount enjoys compounding interest benefits during the entire duration of the deposit, which makes it a lucrative investment option. In addition, investors can avail loans against their deposits, which give them the choice to avoid closing the deposit before its maturity – an act that normally entails severe penalties. Loans are available between 70% and 90% of the deposit value that can be used to meet emergency fund requirements.

With all of these benefits and features, it should be fairly obvious that bank deposits are an excellent option for investors who want to earn higher returns on their investible surplus.

Author Box:

Tejas Kunder is an independent blogger and writing has been his passion for a long time. A journalism grad, he loves exploring the world of sports, health, lifestyle and travel. When he’s not writing, he’s out on his bike discovering new places, apart from that he loves listening to music and catching up on the latest flick.

Further reading:

  1. Fixed Deposits – The Most Sensible Investment Option

Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

Previous post:

Next post: