Time deposits represent a form of investment in which a certain amount is invested at a certain interest rate and for a predetermined period. The conditions, that is, the amount, the interest and the investment time are contractually agreed in advance. After the agreed period of time has elapsed, the amount invested and the interest will be paid to the client’s reference account. That is why it refers to this type of investment as a term deposit. A condition of any fixed-term deposit agreement is that you cannot access the deposit during the investment period.
The fixed deposit interest rate depends on the interest market situation during the conclusion of the contract, the duration of the deposit and, of course, the amount invested. If the term deposit is not properly canceled by the deadline specified in the contract, the provider will generally automatically renew it at the current interest rate for the previously agreed period. However, before concluding the contract, it can also be agreed that the sum will be transferred to a reference account after the term deposit expires.
Security is what makes time deposits so attractive to investors. At the same time, this type of investment also seduces by the guaranteed amount of interest. The constant growth of the invested capital is guaranteed.
The deposit period
The periods differ greatly from provider to provider and vary from a few months to several years. The longer the fixed duration of the fixed deposit investment, the higher the investment interest rate. Time deposits are particularly useful when there are short-term funds available that can be invested.
A medium-term contract should be, in most cases, the smartest decision for the optimal duration of the investment, since interest rates can change. Which means it may be profitable for you to invest the money again after the term deposit period has expired in better condition. Depending on the interest rate of the investment and the current interest market situation, a period of 1 to 3 years should be considered for a fixed deposit. Your money is not tied up too long and can be reinvested if interest rates change or, of course, are used and reversed differently.
Investment times that are too short generally result in a low interest rate, so the return is comparatively low.
What should you pay attention to when depositing fixed deposits?
Due to the large number of offers and the different conditions of the providers, you should definitely consider comparing the options before making a deposit.
To points such as the amount of the minimum and maximum deposits, the interest rate, the length of the term and the possible account administration fees to which you should pay special attention.