Let your savings grow with time deposits

Are you looking for a way to fight inflation? If so, a time deposit might be the right option for you. Time deposit offers a higher interest rate than other savings accounts, but requires you to leave your money for a set period of time. This can be a great way to make your money work for you. Let’s take a closer look at time deposit accounts.

What is a time deposit account?

A time deposit account rewards you with a higher interest rate for keeping your money locked in with the bank for a fixed term. Banks offer various time deposit terms, ranging from overnight to 364 days for short-term time deposits, and over one year for long-term time deposits. Different banks offer different time deposit rates. But one thing that they all have in common is that a time deposit account yields more than regular savings accounts in exchange for not being able to take out your money for a while.

Can I withdraw my money early?

Withdrawing your funds before the agreed period will cost you an early withdrawal penalty fee. This means that even if you need access to some of your cash urgently, withdrawing early might be more costly than just letting the whole term pass and getting all your money back then.

In the event you need to withdraw your money early, Metrobank allows you to withdraw your money, but you will only get 25% of the interest earned if you withdraw during the first-half of the term. If you withdraw during the second-half of the term, you only get 50%. Note that there may also be other fees and taxes involved.

What are some of the benefits of time deposits?

Time deposits are highly secured investment accounts that allow your money to grow at a reliable interest rate. A return on investment (ROI) is easier to predict than regular savings accounts which comes without locking up funds for an agreed period. There are different options in terms of term length and most importantly, you can't touch your money for the whole term. Time deposits are considered less risky than stocks or bonds because you are guaranteed a fixed interest as long as you keep the money in the time deposit for the prescribed amount of time.

Who would benefit from having a time deposit account?

You can take advantage of time deposit accounts if you have savings that you do not intend to use for the time being. If you are not afraid of locking down funds for a fixed term, then you can consider putting some of your money into a time deposit.

If you are worried about locking your money, do not worry! Metrobank has different terms available so you can choose how long your money stays in the time deposit.

Are there any risks to time deposits?

The risk in investing in time deposits is whether the bank you leave your money with is stable or not. For example, if a bank’s management mishandles its finances and ends up closing down, you might not be able to get the amount you were guaranteed. However, time deposit accounts are covered by the Philippine Deposit Insurance Corporation (PDIC). This means, if your bank closes down, the PDIC will pay you your time deposit balance, but only up to PHP 500,000.

Should I invest in time deposits?

Time deposit lets you take advantage of compound interest through time deposit rollovers. This is when a time deposit reaches the end of its term, matures, and its proceeds are automatically placed in a new time deposit.

For instance you initially choose a 3-month time deposit and decide you want it to roll over. When your time deposit matures, it and the interest it earned are placed in a new time deposit for a new term of 3 months. This goes on until you decide to no longer roll over your time deposit.

When you let your time deposit roll over, you can have the interest rate applied to the amount you accumulated from the initial time deposit term. So, this amount compounds with each time the time deposit rolls over. If your initial deposit is PHP 100,000 at 2% p.a. (per annum) with a 3-month term, at the end of the first term, you would have earned PHP 500.00. Deducting 20% tax will leave you with PHP 400. When it rolls over, the starting amount will now be PHP 100,400. At the end of the second term, you would have earned PHP 401.06 (after taxes), which is PHP 1.06 more than what you had earned from the first term. This compounding interest will keep on happening until you decide to deactivate your time deposit. The longer you let it roll over, the more interest you earn.

What is the difference between a savings account and a time deposit account?

Time deposit tends to yield more interest than regular savings accounts which come without locking up funds for an agreed period.

In conclusion, time deposit accounts offer a reliable alternative for people who want to earn more from the money they don’t intend on spending. You can open a Metrobank time deposit account via Metrobank Online where you can keep your savings untouched for an agreed period of time.

Head to the nearest Metrobank branch or log in to your Metrobank Online today to open a time deposit.