What is a Time/Fixed Deposit Account?

The time or fixed deposit account is termed by different names in different countries around the world. It is called a term deposit in Canada, New Zealand and Australia, a fixed deposit in India and in some countries, or a bond in the United Kingdom. Basically, a time or fixed deposit account is an account in a financial institution like a bank where the money deposited cannot be withdrawn for a certain period of time. When the period is over, it can be withdrawn or can be redeposited for another term. Simple speaking, the longer the term, the better will be the yield (interest earning) on the deposited money.

As with some deposit accounts, a time/fixed deposit account has some advantages with which the depositor can have. It gives you a higher interest rate which give a high interest income, it has fixed investment periods of 6, 12, 18 or 24 months which yoou can choose from depending on what is the convenient term for you with optimal earnings. A time/fixed deposit account also gives you security as it is a bank account which is insured by government insurance corporations like the the Federal Deposit Insurance Corporation (FDIC).

However, the earning yield in time/fixed deposit account is much lesser than that of other investment vehicles like stocks and other securities. One of its disadvantages is that the interest rate is subject to changes caused by inflation. The higher the inflation rate, the more effect it will have to the interest earnings of a time/fixed deposit account. In addition, the depositor is not allowed to withdraw the deposited money until the maturity date, the money cannot be used in time of emergency.

When opeing a time/fixed deposit account, one needs to read the financial institutions policies as some of these firms may go bankrupt. However, insurance firms may give your savings security when this happens. The best way to do is to open a time/fixed deposit account in an established or stable bank. A depositor also needs to check the charges or penalties imposed on early withdrawals so as not to be surprised when one chose indeed to withdraw the money before the time/fixed deposit maturity date.