Term deposit or savings account?

Term deposit or savings account?

When you have a surplus of funds in the form of savings, you should consider storing funds in a way that allows you to make profits. Such options are provided by banks with financial products such as term deposits and savings accounts.

Both types of financial products have their pros and cons, so you should read them when choosing a specific product.

If you want to store your funds in a bank and at the same time get additional money in the form of interest profits, you can bet on savings accounts. Currently, setting up savings accounts at banks is not a major problem. Access to electronic banking means that savings accounts can be set up in several minutes.

Such accounts in most banks are free of charge in their conduct. Term deposits can be established by contacting the bank in the branch, by telephone and online. Deposits can be set up for a different period of time, which translates into interest income that can be obtained from a given amount paid into a term deposit.

The flexibility of deposits and savings accounts

Lokata terminowa czy konto oszczędnościowe?

Term deposits are not flexible products. Most deposits do not allow you to withdraw funds for the duration of the contract. When the money is to be paid out primarily on the date of completion of the contract, one must take into account the loss of interest received on the deposit.

It is rare that with long-term term deposits you can count on no loss of part of the interest when withdrawing money in the last months before the end of the term deposit contract.

When time deposits are established, it is necessary to consider whether the deposited funds will not be needed before the end of the contract.

It is worth to deposit only those funds for term deposits, at which you can be sure that they will not be needed for a specific period of time. Instead of long term deposits, you can also opt for short-term deposits. Such deposits can be set up for a few days, a month, several months. The disadvantage of such a solution, when one wants to use fixed-term deposits over a longer period of time, is in most cases the necessity to extend the deposit after the end of the previous term deposit contract.

Savings accounts are very flexible in financial products. You can store free funds on them instead of on a settlement account. This allows you to use a much higher interest rate than on interest-bearing billing accounts. The use of savings accounts is particularly beneficial when billing accounts are not interest-bearing at all.

Interest on the deposit and savings account

Time deposits in relation to savings accounts in most cases have a higher nominal interest rate per annum. If you have free cash, which certainly will not be used at a certain time, then choosing fixed-term, even short-term deposits is a much better solution.

If you are not sure whether the money stored in the bank will not be needed in the future, then it is worth choosing savings accounts.

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