What is Fixed Deposit Account? What is Time Deposit?

What is term deposit account or fixed deposit account or time deposit account?

The fixed deposit account is like the form of contract or a deal or an agreement between the customer and the service provider (bank and the financial institution or even the thrift institutions and credit unions) regarding the placement of certain deposit amount for the particular time period in a specific interest rate. Fixed deposit is also known as term deposit, time deposit or certificate of deposit (CD), bond etc. in different countries. Unless the contract or the maturity period of such account expires, the principal amount or the deal amount cannot be withdrawn from the account. And the dealt interest rate is also invariable till the deal expiry date. The interest rate in such account type is on higher side proportional to the deposit size and time period. The payment of interest rate may be monthly, quarterly, half yearly or annually but the principal amount to be paid only after the maturity period.

Fixed deposit meaning. Time deposit meaning. Term deposit meaning.

So, the deal cannot be broken before the maturity period. If the money is urgently required for some emergencies, then the service provider may provide a certain percent of loan against such fixed deposit in a competitive interest rate. Or the service provider may allow to premature the deal i.e. breaking the deal before the expiry date, taking a certain percentage of penal charges for early withdrawal. But the customer needs to prior inform the service provider about the requirement of fund and termination of the contract.

Fixed Deposit is also the attraction of the service provider as they are constantly attempting to maintain a certain percentage of this deposit in their total portfolio because they can get the money from the public for a longer duration to enhance their business as well as profitability. They invest such funds in long-term businesses and financial products with a higher return or in short-term financing having regular maturity. Thus they are willing to pay the higher rate of return to the customers in their money.

Some of the major indications of Fixed Deposit/Term Deposit/Time Deposit Accounts are:

  • The fixed deposit can be opened by either the individual as well as the artificial person or the entity.

  • Fixed Deposit Receipt (FDR) or Certificate of Deposit (CD) is provided to the customer as a certificate of deposit from service provider after opening the account.

  • Once the fixed deposit account is opened, then such account is not available for any type of transactions.

  • The interest rate on fixed deposit is on the higher side which always depends upon the volume of fixed deposit amount, maturity period and offerings of service providers.

  • The interest rate on such account is also fixed for specified time period i.e. till maturity period.

  • The fixed deposit can be opened ranging from short period to very long period i.e. like one month to 10 years.

  • The separate account has to be opened to create a new deal or new fixed deposit.

  • Fixed deposit account can be renewed for further period of time after the maturity in prevailing interest rate and offerings. If the customer is not willing to renew the contract, then the money can be withdrawn from the service provider.

  • FDR or CD must be surrendered to the service provider after the maturity period of fixed deposit in all cases.

Fixed deposit encourages people to save money in terms of long-term investment with a comparatively higher rate of return. A fixed deposit can be one of the safest investments, especially for low-risk investors. Fixed deposit is also secured by the deposit insurance coverage in most of the cases but the amount of insurance coverage may vary with each country’s or service provider’s regulatory policies and guidelines.

Now you know the fixed deposit definition/term deposit definition/time deposit definition. So now if you have to say something about the fixed deposits, then please feel free to use our comment section as below.

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