Term deposits (2024)

FAQs

What is the term deposit? ›

Term Deposits, popularly known as Fixed Deposit, is an investment instrument in which a lump-sum sum amount is deposited at an agreed rate of interest for a fixed period of time, ranging from 1 month to 5 years.

Term deposits are a safe way to lock away money. But you could earn more by investing it elsewhere. You may be able to earn more money by investing in property or shares, but are at greater risk of losing it.

Flexibility: CDs typically come with a fixed term, meaning you cannot withdraw your funds before the maturity date without incurring penalties. Time Deposits, on the other hand, may offer more flexibility, allowing partial withdrawals or early termination with some penalties.

In Term Deposits, the sum of money is kept for a fixed maturity and the depositor is not allowed to withdraw this sum till the end of the maturity period. That is why they are called as Term Deposits because they are kept up to a particular term. But when it comes to Term Deposit, here's what you need to know.

Disadvantages of term deposits

If you need your money before the term ends, you may have to pay a penalty fee. You may only receive a proportion of the interest earnt, or none at all. Scammers are offering fake investments advertised to be 'like a term deposit' that claims to be a 'new breed of investment'.

You will not be able to readily access your money during the term invested. If you wish to access your money before the term ends you will have to pay an administration fee, miss out on interest which you would otherwise earn and you may need to provide 31 days' notice depending on the type of term deposit.

This CD will earn $117.15 on $500 over five years, which means your deposit will grow by 23.4%.

A 12-month CD will often come with a higher interest rate than a 6-month CD, though this isn't always a given. Right now, though, many banks are offering a better rate for a 12-month CD. So if your goal is to earn the maximum amount of interest, then tying your money up for a year may be the right choice.

Is a term deposit the same as a fixed deposit? ›

Term Deposits and Fixed Deposits share similarities as both are secure investment options with fixed interest rates. A Term Deposit offers flexible tenure and has minimum deposit requirements while a Fixed Deposit has a longer tenure and offers benefits of compound interest.

Term deposits will generally give you a better rate of return than a savings account and a much better rate than a chequing account. If you're parking money for an emergency fund or for a vacation in the next couple of years, a term deposit is a great option.

Term Deposits and Fixed Deposits share similarities as both are secure investment options with fixed interest rates. A Term Deposit offers flexible tenure and has minimum deposit requirements while a Fixed Deposit has a longer tenure and offers benefits of compound interest.

Unlike term deposits which have a fixed interest rate, savings accounts generally have a variable interest rate, so will be dependent on market conditions. That means if interest rates go down you won't earn as much interest; of course, if interest rates do go up, you'll be able to benefit from getting a higher rate.

A term deposit is a fixed-period investment option offered by several banks and financial institution. Term deposit investments generally have short maturity period ranging from one week to five years. They also have minimum deposit requirements and earns you guaranteed returns with a fixed interest rates.