Types of Term Deposits

Just as there are several kinds of savings deposits, there are also several types of terms deposits. Most of these types deal with the expected maturity of the said instruments, whether short-term or long-term. Short term is generally conceded to be anything less than two years; long term is two years and above. At any rate the main difference between the two is the rate. The shorter the term is, a lower rate applies and longer terms deserve higher rates. The purpose of having time maturities that differ significantly is to cater to various customers who may park their funds temporarily in term deposits pending final use or disposition. Some of them may not need their funds for a year or so, and so it makes sense to put it into term deposits that serve a dual purpose: safekeeping and earning power.

Investing requires a proper balance between risk and reward. This principle is the same that applies when making decisions as to which bank to put money into. In most people's minds, their main consideration is an attractive interest rate and this often puts blind sides them to all other factors that need to be considered. An example here would be financial stability. For risk-adverse people, safety is more important than interest rate and they would rather earn little than risk losing all their monies in a high-interest rate but riskier bank. Banks have their own little tricks or gimmicks to entice depositors to place funds with them but everyone should be on the lookout for these often deceptive marketing techniques.