Term Deposits
Term deposits, or time deposits, as they are also known, refer to sums of money placed on deposit for a specific period of time in banks, thrift institutions or credit unions. These deposits are essentially considered as “money in the bank” as each is guaranteed 100% by the Federal Government. In the case of bank term deposits, these are insured by the FDIC, and in the case of credit union deposits, with the NCUA. As the deposits are virtually risk free, so the returns offered are less attractive when compared to other investments such as those in stocks or bonds. Term deposits are also called Certificates of Deposit, or C.Ds.
Term deposits can be invested for periods ranging from one month to three months, six months, one year and five years. The longer the funds are deposited, the higher the return will be for the investor. Additionally, the larger the sum place on term deposit, then the higher will be the interest rate that the end investor will receive. Term deposits normally start at 1,000 USD, and US government guarantees are offered for sums up to 100,000 USD. Term deposits for amounts higher than the guaranteed amount of 100,000 USD are also possible. These are often termed “Jumbo C.Ds” in the U.S. Finally, higher rates are also offered by smaller financial institutions such as small local town banks, so these are also worthy of consideration when making these investments.
Interest paid on term deposits is normally fixed rate, and is compounded, offering investors the bonus of earning interest on interest. This is one of the major attractions of these investments. However, do not consider term deposits if you are likely to want to use your money at short notice. Breaking a term deposit can result in loss of interest and other penalties. In some cases, withdrawing your funds before final term deposit maturity can result not only in loss of interest, but also a fine resulting in your receiving back less than your initial investment.
For those investors looking for secure investments and who are able to lock up their funds for specific period of time, then they should certainly consider term deposit investments.
For more infomation on investment options choose from the list below. |
|
|
|
|
|
|
|
|
|
Banking - Business Finances - Economics - Insurance - Investing
Major Purchases - Personal Finances - Stock Market - Taxes
|
