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What Is Cash Interest?

Cash interest refers to the the money that is earned by an account. This money is received by the owner of that account after a determined period of time. Not all accounts earn cash interest, and not all accounts have the same rate of interest. A savings account, for example, can earn interest annually. The interest rates applied to savings accounts vary from bank to bank, but in general, they are quite low. A time deposit account, on the other hand, has a higher rate of interest. In many cases, an account needs to have a minimum balance at all times in order to earn interest.

Depending on the type of account, the interest rate applied can be fixed or floating. A fixed interest rate is simple: the interest rate applied is determined at the beginning of the year and does not change within the same period. A floating interest rate, on the other hand, varies depending on the changes in the country’s prevailing interest rate. Both kinds of interest rates have their advantages and disadvantages. Having a fixed interest rate gives one the advantage of not risking losing money in case the prevailing interest rate goes down. On the other hand, if the rate goes up, one does not enjoy the benefits. Having a floating interest rates opens one up to the risk of losing money if the prevailing interest rate goes down, but also opens up the possibility of earning much more if the rate goes up.

The account holder may receive the cash interest in different ways, but the most common methods are via check or direct deposit into the account that earns the interest.

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