The Curious Case of Bank Deposits!

The Curious Case of Bank Deposits!

Saving habits go a long way in an individual's life, especially during times of emergency or financial crisis. In order to effectively start saving, one needs to know the details about bank deposits and types so that you have a clear picture of different saving options available. While in India you have different saving deposit options available, read through to know which one suits you best!

We all know depositing money in a bank is a good habit as it helps you to build savings for emergency uses. However, not all of us may be aware of the various types of bank deposit options available.

Deposit– Did that sound alien?

The term “bank deposit” refers to a certain amount of money which is placed in a bank account either for a long or short duration. This deposit is kept securely with the bank and you can withdraw it during an emergency and also earn a certain amount back as interest.

Types of bank deposits

Deposits can be largely categorized into demand and time deposits. Let’s explore the difference between the two:

Time or Term Deposits	Demand Deposits
Money is deposited for a particular tenure and cannot be withdrawn before its maturity period. You cannot even opt for partial withdrawal before the term gets over. There is a fixed maturity amount which is guaranteed when the money is withdrawn and the interest rates are quite higher when compared to other deposits.	Funds which can be withdrawn by the individual at any point without any advance notice to banks. You can withdraw the amount using cheque, ATM withdrawal or directly at the bank branch. There is no fixed term or maturity amount guaranteed when the money is withdrawn and in most of the cases, the interest is lower when compared to fixed deposits.

Term deposits– Types and features

Broadly speaking, term deposits are of two main types; fixed and recurring deposit.

• While fixed deposits require you to pay a certain amount periodically and give you a higher rate of interest; recurring deposits require you to deposit money on a monthly basis and the interest rate is lower.
• Recurring deposit can be opened for any period starting from 6 months to 120 months whereas the fixed deposit is generally opened for a minimum of 5 years.
• Both these deposits cannot be withdrawn at any point in time and you can only do that at the time of maturity.

 Demand Deposits– Types and features

Demand deposits too can be divided into two main types– current and savings accounts.

• Current accounts bear no interest rates and account for the smallest fraction of money; though banks always may ask you to maintain a minimum balance.
• Current accounts are ideal for businessmen, companies or business enterprises and are not ideally meant to help in saving.
• Savings account on the contrary are ideal for pensioners, salaried people, and even school or college going students.
• Though there are no limits usually for the amount of times you can deposit money in a savings account, yet there are restrictions on the number of withdrawals allowed during a period.
• The bank pays a good amount of interest on savings accounts, usually up to 7-8% depending completely on the bank and its policies.

Now that you know all about the types of bank deposits, it should be easier for you to make a choice and start saving. Like they say it’s never too late to take the first step, so make a wise decision and take the first step towards saving. 

Happy Investing

Source:Yahoofinance.com