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What Is a Time Deposit?

A time deposit is a kind of deposit product offered by banks, which does not allow the account owner to touch or withdraw the money before the specified period. A time deposit is called by several other names: term deposit, bond, and fixed deposit. The terms differ depending on the country, but time deposit is the most commonly used.

Many people with considerable sums of money prefer to use a time deposit instead of relying on the “normal” savings account. This is due to one major advantage: a time deposit earns much more interest than a savings account. The growth of the deposit depends on the amount and the time frame. Another advantage is that the restrictions on a time deposit make the money “safer” in that the depositor will not be easily tempted to take the money out in small amounts over a period of time, only to realize that a huge chunk has been spent.

In general, a time deposit can be one of two things. One, the period is determined at the beginning. The depositor will not be allowed to withdraw money until this period has passed. In cases of extreme emergency, and depending on the location, this rule may be waived, but only for a fee.

Two, withdrawal is allowed, but only if the depositor sends in a request within the specified time. For example, the request must be made 30 days prior to the day of withdrawal. This required period is dependent on the bank and the country’s laws.

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