Bank deposits - what is a deposit? Interest on deposits. All secrets.
Mar 18, 2018
The proverb about saving drowning is familiar to everyone. In the case of cooperation with the bank, it will come in handy. The mechanics are very simple and entertaining. When making a deposit, the bank receives money at its disposal. At the end of the deposit period, the client will receive, for example, 12% in the form of interest. During this time, the bank will issue this money on credit at 20%.Having received thus 8% of net profit. As a result, an interesting picture emerges: the lower the interest rate for the depositor, the more the bank will earn and vice versa.
An example is given to clearly show how attentive you need to be when making a deposit. All information must be collected in advance. Already going to the bank, the depositor must be sure that he made the right choice. At the same time, having sufficient knowledge that will enable him to conclude a profitable deal. Do not become a bargaining chip in a big game. Of course, information about deposits is now a lot and it is not difficult to get confused.
The main thing is not to rush and disassemble everything calmly. Money does not like rushing and will not escape if it is not customized. Hasty decisions can not only significantly reduce the level of income. But also to jeopardize the very existence of the financial safety of the depositor. In this regard, it is worth repeating once again - decisions should be taken carefully and wisely.
What is a deposit?
In simple words, the deposit is money that the client transfers to the bank for a limited period with certain conditions. Under the terms are understood as the interest itself, and the formula for their accrual. Pay attention only to the interest rate is not only the biggest, but also the most common mistake. The way these percentages will accrue plays a big role, if not the most important one.
Deposits are urgent and "on demand".The latter are very similar to the first, only the interest rate is usually much lower. And the conditions for obtaining a deposit back may be different. Which category of deposits to choose depends on personal preferences, timeframe and other conditions. As for more traditional, time deposits, they are divided into three categories:
• short-term deposits - the contract is usually concluded for a period of 1 to 3 months;
• medium-term deposits - in this case the period increases from 3 to 9 months;
• long-term deposits - those are considered to be all deposits for a period of 9 months.
It is important to understand that deposits on a term deposit can only be received after the deposit expires.
How is interest calculated?
Depending on the type of deposit and the purposes of the depositor, the methods for calculating interest differ substantially. The charge can be made:
• at the end of the deposit period;
• at certain intervals( monthly, quarterly, etc.);
• with interest capitalization;
• without interest capitalization.
The main differences are most conveniently illustrated by an example. The interest on deposits that are accrued at the end of the term is simply added to the principal amount. So, putting on the deposit 100 cuat 12% per annum, the client will receive 112 cu after the expiry of the term. A similar situation with the calculation of interest at regular intervals. If interest is charged, say, once a month, then the calculation is made using the following formula:
( 100 * 0.12) / 12 = 1
Where $ 100- the amount of the deposit, 0.12 - 12% per annum, 1 cu- The monthly percentage. Payment of interest allows the depositor to receive a stable income on a monthly basis. At the end of the deposit period, he will receive back 100 cu. A miracle of capitalization of interest!
When deciding to deposit money for a deposit, the depositor must be sure that he will not need this money for the duration of the contract. If such confidence is present, then a very profitable transaction can be considered deposits with a capitalization of interest. The method of calculating interest in this category of deposits is very similar to the above. With one significant difference. Interest once a month or once a quarter is added to the total amount of the deposit. And the next accrual is already taking into account these percentages. Example:
1 month:( 500 * 0.12) / 12 = 505 USD.at the end of the first month;
2 month:( 505 * 0.12) /12=510.05 у.е.at the end of the second month, etc.
It is not difficult to guess that after the expiration of the deposit period, the depositor will receive a fairly decent amount of money. The difference will be even more noticeable when compared to a deposit without interest capitalization. There are also deposits that allow you to add money to the main account at any time. In this case, everything is simple - the interest will be added based on the amount added. The larger the amount, the more profit.
Which currency should I choose for the deposit?
Strangely enough, but with the currency everything is quite simple. The deposit is often worth the transaction in the currency that is available at the time of the transaction. Or in the one that the client wants to possess at the time of the expiration of the deposit. Conversion without special need from one currency to another will only increase monetary losses. For those who opened a deposit with monthly interest, it is most profitable to do so in the national currency.
What else to pay attention to?
The factors listed above are the main ones when opening a deposit. But there are a number of subjective factors, which should also be noted. Among them are:
• the reputation of the bank and the professionalism of its employees;
• simplicity of deposit registration;
• availability of information on the balance on the account and so on;
• tariffs for service, etc.
Such moments will allow to establish fruitful cooperation. Which, in addition, will be pleasant and comfortable for the depositor.
It would seem that it can be simpler than bank deposits. He took the money, took it to the bank, and put it on the deposit. The customer is satisfied, the bank is satisfied and the money is accrued. So everything looks at first sight. In fact, in order not to get trapped and really increase your income, you need to have a holistic view of deposits. First of all, you need to clearly understand that the bank is a structure aimed at making a profit. The bank is interested in its profits, and deposits are only one of the means of obtaining it.
Cooperation of banks with clients.