Types of Time Deposits

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 learned this the hard way during the phase of 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, 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.

Time Deposits

These, as against demand deposits, are made for a fixed time for a pre-decided rate of interest. In their case, there is a date of maturity and banks do not allow premature withdrawal of money. If the depositor needs money urgently, then he has to pay a penalty to the bank for this activity. Withdrawing money from a time deposit is not as easy as from a demand deposit, because the account holder has to give a written notice to the bank for getting the money.

The best part about them is the high interest rate, as the banks are able to use this public money for a longer time in these 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, they are to be made with a long-term investment perspective. After completion of the deposit period, you either get your money back or may continue the scheme to get even higher returns. The funds in time deposits are protected by Federal Deposit Insurance Corporation. In many countries, they are also known as fixed deposits or term deposits.

Main Types of Time Deposits

Liquid CDs
Liquid Certificates of Deposits (CDs) are helpful for investors because in these 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 The maximum amount of money which can be withdrawn is decided by the bank.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 CDs
These deposits come with one to five-year deposit periods and with restrictions on withdrawal. Penalties are levied on early withdrawal for traditional CDs.

Brokered CDs
Broker bought CDs are first purchased by your broker and then sold to you, and have a deposit period ranging from a week to more than a year.

Other Time Deposits Types

Here are some of the important types of time deposits explained in the following section.

Renewable
These are 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
These are deposits in which the customer keeps money with the bank for a specific period and then withdraws it along with the interest amount. Such deposit schemes help investors get big amounts of cash in bulk, which can be used in making large purchases.

Fixed
These allow their investors to withdraw their entire money before maturity of the deposit, on payment of fees to the bank.

Flexible
These are more advantageous as compared to fixed deposits because here, you get higher interest rates from banks, and the facility to withdraw your money partly before maturity.

Standard
These are the kind 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.

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.