The Different Features Of A Term Deposit

Those who are looking at the different financial and banking products for investment will find term deposits to be lucrative. These are the investments of the fixed nature where the funds can be withdrawn only after a certain time limit. This kind of financial product has several names and it is referred to as term deposit in countries like New Zealand, Canada and Australia. It is a term that is common Europe and US as well.

Defining term deposits

Those who are looking for the best term deposit rates Perth will surely be wondering whether it will be lucrative to invest in term deposits. These are savings instruments of the non liquid nature. They come with a maturity date that is short term. The term can range from a few months to a number of years. The financial institutions usually pay a higher rate of interest with rental bond loans in these products than the liquid deposits. These instruments are low risk and safe and those who can park their funds for a short period of time, they will surely love term deposits.

Different kinds of term deposits

There are different financial products that have the same features as a term deposit but are named differently. For instance, the certificate of deposit that usually has a maturity period that can vary from one month to five years. These certificates are issued in the primary market as well as in the secondary market where the issues are sold through a second party. One can look at the best term deposit rates Perth in order to decide which one would be more lucrative.

Insurance coverage

In certain countries the regulatory bodies offer insurance coverage on these products. The principal and the accrued interest up to a certain limit in banks and other financial institutions are insured by regulatory bodies. That makes these products safer than other products. However, if the maturity period is short, the interest offered is not much and hence, it makes sense to opt for a term deposit of a longer tenure. It is necessary to understand these nuances before one decides to opt for a term deposit as compared to other financial products.

 How interest is paid

The interest that is offered on term deposits is decided as an annual rate or as a compound interest. An account that is opened for term deposit will have interest accrues on a fixed or variable rate. In case of a fixed rate CD the same interest rate will accrue while the variable rate might increase or decrease as per the initial rate. These features need to be known in order to decide on the right term deposit product to invest in. One can also refer to a financial expert for advice.