Time Deposits
Time deposits, are also called term deposits or fixed deposits in some countries, are deposits in banks or financial institutions for pre-decided or fixed time period. The depositor is promised a fixed rate of interest for the said period by the lending company. However, there are some restrictions for the depositors so far as withdrawing money is concerned. In the time deposits, it's not possible to withdraw money before the stipulated time of investment and if it's to be done, then he has to pay a penalty to the lending company. The depositor is also required to give a written notice to the lending company when he wishes to withdraw his time deposit cash. Banks have some policies regarding offering interest for time deposits. The longer time deposit you opt for, the more will be the rate of interest offered to you. Once the duration from the term deposit is over, you can either withdraw your money or choose the deposit scheme again. The rate of interests earned over time deposits is more than that offered on savings company accounts, and less than that earned through long term collateral investments.
There are 3 types of time deposits that have been explained below:
- Traditional Certificates of Deposits: The investment amount of the traditional certificates of deposits can be between 30 days to five years. Withdrawal before maturity can lead to a deduction of penalty by the lending company. The Federal Deposit Insurance Corporation insures certificate of debris issued by banks
- Broker Bought Certificate of Debris: These time deposits are first bought by brokers from banks and therefore are then sold to the common customers looking for opportunities. In such CD's, you have options of keeping money invested for less than 7 days and also for more than a 12 months
- Liquid Certificates of Deposits: The best thing concerning the liquid CD's is that depositors can withdraw their money at any point of your time without penalty charges. Thus, this is an extremely flexible investment option for a myriad of investors. However, the amount of money which you can withdraw without penalties is set by the banks
Demand Deposits
The discussion on time deposits vs demand deposits could be complete only with the proper understanding of demand debris. In the case of demand deposits, the depositor is liberated to withdraw his funds from the account which he holds using the bank any time, without giving any notice to the financial institution for the withdrawal. So, the concept of demand deposits is exactly opposite to that of times deposits. Though getting back funds, fast, is the main benefit of demand deposits, the major disadvantage is that fees charged for these types of accounts are higher and interest rates offered are not adequate enough. So, demand deposits would be the best option for people who need money a few weeks or months. On the contrary, long term investors is going for time deposits which would yield higher returns.
There are 3 types of demand deposits that have been explained below:
The discussion on time deposits vs demand deposits could be complete only with the proper understanding of demand debris. In the case of demand deposits, the depositor is liberated to withdraw his funds from the account which he holds using the bank any time, without giving any notice to the financial institution for the withdrawal. So, the concept of demand deposits is exactly opposite to that of times deposits. Though getting back funds, fast, is the main benefit of demand deposits, the major disadvantage is that fees charged for these types of accounts are higher and interest rates offered are not adequate enough. So, demand deposits would be the best option for people who need money a few weeks or months. On the contrary, long term investors is going for time deposits which would yield higher returns.
There are 3 types of demand deposits that have been explained below:
- Money Market Accounts: Money market accounts are types of demand deposits where the interest paid to the depositors is never fixed and may change every day. Though these accounts give higher returns compared to saving accounts, changing interest rats may put depositors at loss sometimes. Fees charged for these accounts are low
- Looking at Accounts: Checking accounts generally do not pay interest towards the depositors and the fees charged for such accounts are often high. These accounts are ideal for businessmen who nee immediate funds for completing transactions of buying goods
- Savings Accounts: Savings accounts are the most widely used type of demand deposits. Interest is paid at a set rate for these accounts which is lower than that promptly deposits. Fees are not charged for savings accounts by banks and when charged, they would be quite low
Hopefully, the above time deposits vs demand deposits comparison should have helped you know various types of bank accounts. The financial markets and lending options of this generation are advanced and consumer friendly. Therefore, as a smart investor, you should take advantage of those investment opportunities to meet your wealth creation targets.