Term Deposit Definition - Term Deposit vs Fixed Deposit (2024)

FAQs

What is the difference between term deposit and fixed deposit? ›

A term deposit is often used when the deposit is extended for a certain period, say 3 months, 6 months etc. Fixed deposits, on the other hand, are used when the deposit is for a period of 6 months or greater than that. The deposit amount offers a higher rate of return as compared to the banks' savings accounts.

Term Deposits, popularly known as Fixed Deposit, is an investment instrument in which a lump-sum sum amount is deposited at an agreed rate of interest for a fixed period of time, ranging from 1 month to 5 years.

While term deposits have set maturity dates and earn interest for the duration of a specified term, call deposits have more liquidity but may require higher minimum balances. Here's everything you need to know about each of these types of accounts.

While term deposits can be used for this purpose, a high interest savings account allows you instant access to your cash at any time and may offer a better interest rate than a shorter-length term deposit. These are goals you are planning to accomplish within the next one to five years.

You will not be able to readily access your money during the term invested. If you wish to access your money before the term ends you will have to pay an administration fee, miss out on interest which you would otherwise earn and you may need to provide 31 days' notice depending on the type of term deposit.

If money is deposited in a savings bank account, banks allow a lower rate of interest. Therefore, money is deposited in a fixed deposit account to earn interest at a higher rate.

Term deposits are also called certificates of deposits. Customers can view the conditions of the term deposit via a paper statement. This statement includes the required minimum principal amount, the interest rate paid, and the duration (or time to maturity), as agreed by the bank and the depositor.

Corporate Fixed Deposit schemes offer higher returns on your investment, but choosing the right company is imperative. If you choose a good Company FD scheme, you will generally earn more on your investment than bank FDs as these schemes offer the highest interest rate on FD.

CIMB's Why Wait Fixed Deposit-i account works like a normal fixed deposit. The good thing is, unlike a normal Fixed Deposit where you receive your interest only at maturity; CIMB's Why Wait Fixed Deposit-i account allows you to collect your returns in the form of profit, upfront.

What is the difference between fixed deposit and current deposit? ›

In current deposit account withdrawals are allowed throughout the tenure of the account whereas in fixed deposit account, withdrawals are not permitted until the expiry of the fixed period.

Generally, with a savings account, there is no fixed tenure period. You can run your savings account for a lifetime until you decide to close it. With FDs, you get a tenor of seven days to ten years. This means you can invest in multiple fixed deposits with different tenures.

If you struggle with the temptation to dip into your savings, perhaps the biggest benefit with a term deposit is that your savings are locked away, so you can't spend your savings on an impulse purchase. The other major advantage is the certainty of a fixed interest rate.

The strategy can be used while investing with the same credit union or bank, or across several different institutions. The investor can either withdraw the principal and interest upon maturity or reinvest the funds if they are not needed. Term deposits offer a fixed rate of interest over the life of the investment.

Public Provident Fund (PPF) PPF is a government-backed long-term investment option for risk-averse investors to earn fixed interest rates decided every quarter by the Finance Ministry. The minimum tenure of a PPF account is 15 years, extendable in blocks for five years after that.

Returns: When returns in FD or RD are compared, then FD seems to give higher returns. The reason is that in RD, the account holder deposits monthly and therefore, the interest is also earned accordingly. Usually, the FD amount is deposited once, and is a lump sum that earns a higher interest rate.