subject: Savings Account or Term Deposit: Where to Invest Your Money [print this page] Savings Account or Term Deposit: Where to Invest Your Money
A term deposit is a bank product that makes deposit of money to be on holding period so the depositor can only withdraw the money after that period without penalty. If, for instance, you want to withdraw the money in a time deposit, you will be charged a penalty for withdrawing it prior to the maturity date. In term deposit, the longer the withholding period, the higher the interest and so the profit from it. In US, a time deposit is called certificate of deposit or CD.
If you have a substantial amount of excess money, say, $10, 000 it is advisable to invest it in time deposit or certificate of deposit rather than on regular savings account.
Remember the money put in a time deposit or term deposit cannot be withdrawn before the maturity date on the other hand you can withdraw your money on a savings account any time you want.
There is a specific charge or penalty you must pay if you like to withdraw your money in term deposit prior the maturity date ends.
Thus, it is advisable to finish the holding period before withdrawing money from time deposit unless you desperately needed the money.
If you are thinking to invest some of your money in term deposit, make sure that you have still enough money in your savings account to compensate for unexpected needs. The excess money can be deposited to term deposit for higher profit.
One benefit of investing money in time deposit or CD is that it earns higher interest rate than normal bank account.
If you invest your money in term deposit, it is insured by the bank and the government up to P500,000 in the Philippines. In the US, certificate of deposit is also insured by FDIC or NCUA.
You can select where to put your money, in savings account or term deposit. Bear in mind that money in term deposit earns bigger interest with holding period while money on savings account gives low interest with big liquidity.
In order to open a term deposit account, you need to visit the bank of your choice or you can apply online. One bank that gives high interest rates in the Philippines for time deposit is BPI.
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