What are Time Deposits?
A time deposit or more commonly known as Certificate of Deposit(CD), is a cash deposit investment with a banking institution with a higher interest rate than normal savings deposit but has a fixed period of time that would not be able to withdraw the money. Your savings will earn more on interest rather than just on a regular savings account.
The end of the period or term is called the maturity date wherein you can withdraw your money with the interest earned. Depending on banking institution and government laws the interest earned can be subjected to tax deduction.
Yesterday I got my feet wet on the matter and got my first certificate of deposit. I got paid for a gig and I set aside the 20% for savings then the rest for debt payment. I was able to round off my total savings to roughly $200(P10K) I immediately went to my bank and made a payment to lessen my credit card debt then proceeded to make the time deposit.
The interest rate was amazingly small at 3% per annum on 1 year term and 2.125% per annum on 30,60,90 days but for learning how it works I went ahead and signed up, I only took the 30 day term but have the option for automatic renewal if I don’t encash on the maturity date.
Here is the computation:
Principal x Interest x Number of Days / 365 days.
My total earnings is subject to Deduction tax by law.
Total Earning x Deduction Interest = Grand Total
Computed with the tax deduction I would earn just a mere .35c(P16.50) a month.
I’ll look into other banks that offers higher rates when the maturity ends for this deposit then transfer. Smaller banks tend to offer higher interest rate than bigger banks. Hopefully I’ll keep saving and keep adding to the capital so the money earns more.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
Leave a comment