What is a term deposit?

What is a term deposit?

Saving on a term deposit is basically the same as on a normal deposit. You fix your savings for a certain period. The term of the bill is only shorter. How exactly do time deposits work and when can you best opt ​​for this type of savings?

Term deposits

Term deposits

A deposit is a savings account on which you deposit your savings for an agreed time. That can be a long time, for example 5 years or 10 years. But you can also opt for a few months or 1 or 2 years. With a term of up to 2 years, a deposit is also referred to as a short-term deposit. You may not withdraw your money during this period and you may not transfer any new money to it. If you still want to stop your deposit prematurely or withdraw part of the money, then you pay a fine at most banks.

Because your money is fixed on a deposit for a certain period of time, you often receive a higher interest rate on your savings than when you save on a freely withdrawable savings account. The longer you hold your money, the higher the interest that gets. So if you can miss the money for a certain period, a deposit can be a smart choice.

Term deposit interest

Term deposit interest

Saving on a deposit should therefore yield more interest than saving on a freely withdrawable savings account. Always check carefully whether this is really the case. So compare the deposit rates with each other, but also compare the deposit rates with the highest savings rate for a freely withdrawable account and also with deposits that run a little longer.

Tip! Saving on a term deposit is of course only attractive if the savings account with the highest savings rate yields less interest. Check it quickly Compare Savings rates.

When comparing, take into account the difference between nominal interest and effective interest. The nominal interest rate is the interest rate that you receive. But the effective interest rate may be higher. The effective interest may be higher. This is namely the actual interest that you receive after one year. This includes any interest on interest effect.

Short-term deposit – When a good choice?

Short-term deposit - When a good choice?

For short-term deposits, always pay attention to whether the interest rate mentioned is per year or per term. That can ultimately make a big difference. If the highest savings interest rate is displayed per year, it is possible that deposits that are displayed per term may still yield more.

In addition to the current interest rates, more factors play a role in making your choice. For example, it is smart to look at the trend in interest rates. If the interest rates are low, it is not convenient to take out a long-term deposit. A long-term deposit is a good option if the interest rates are high.

It is also important to look at the chance that you want to put in new money or withdraw money. This is not possible during the term of a deposit. So if you want a deposit, but also want to change the balance regularly, then choose a deposit of a certain number of months. If you want more flexibility, a deposit does not suit you.

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