Time or fixed-term deposit accounts are recommended for conservative investors. (2 Articles)

6 min readAug 31, 2023

~ Thursday, August 31, 2023 Blog Post ~

I chose low-risk and high-return investment products when I was just starting my investment journey. A fixed-term or time deposit account is a bank offering and investment type that has the advantageous features I want as a conservative investor.

I like the protection that my time deposit accounts offer my hard-earned funds. My principal gets the no risk-higher returns benefits.

My time or fixed-term deposit account allows me to relish higher returns, with my money growing at a dependable interest rate. Moreover, this bank product enables me to be inflation-ready by increasing my savings’ value over time.

My fixed-term or time deposit account lets me keep my savings untouched and earn more from these idle funds that I do not intend to spend in the short term.

I want to include the concept of a time deposit account here in my blog. The two blog posts below about a time deposit account are from financial institutions in New Zealand and Indonesia.

Although the requirements of opening this kind of bank product differs in various banking institutions based in different countries, its beneficial features are the same.

Article #1: Are term deposits worth it? (From Unity Credit Union — New Zealand)

Fixed-term investments are a great way for Kiwis like you to secure your savings, lock in a great rate, and earn high interest. But should you really set your money aside just to earn high interest? And is it a worthwhile investment for you, whether you’re saving for a rainy day or retirement?

If you find you’re still on the fence having read up on how they work and when you can expect a return on your investment, then consider these other great benefits that make them more than worthwhile for Kiwis just like you.

Wait, what is it again?

Often earning a higher interest rate than other savings accounts, a term deposit sees you locking your money away at a fixed rate, and for a fixed term, which usually falls into one of two categories:

Short-term deposits — up to 12 months or less.
Long-term deposits — anywhere up to 5 years.

Any interest earned on a short-term deposit is usually paid out at the end of the term, while lengthier investments tend to pay out quarterly or annually into an account of your choosing. Once this term is up, you’ll then be given the option to either reinvest your funds — plus interest earned — into a new term deposit or have it deposited into your account in full.

Still on the fence? Consider these 3 benefits of a term deposit:

1. They’re a safe investment.

Fixed-term deposits are some of the safest ways you can invest your money. You simply select a term, lock in a great rate with a guaranteed return, and sit back as your money does the work for you.

2. They earn a higher interest rate.

Even the highest rate savings accounts often can’t compete when it comes to interest rates. That said, this doesn’t automatically make savings accounts a bad option. Far from it, in fact.

The question of whether a savings account or a term deposit is best for you depends on the level of access you need to your money, how long you’re comfortable setting it aside, and what you’re saving for.

That said, for those looking to save for the long-term and earn the highest rate, a term deposit is a great choice.

3. They offer a guaranteed return.

When comparing interest rates of savings accounts and term investments, it’s important to remember that while the rates may be similar, the type of interest you earn is different. Savings accounts offer what is called a variable rate, which means the interest you earn fluctuates depending on various economic factors, the national rate, and your bank or credit union’s going rate, which is subject to change.

A term deposit, on the other hand, offers a fixed rate. That is, once you’ve locked in a rate, it will stay the same for the life of the term. There’s no need to keep an eye on the national rate, or bank on a return that might not eventuate: your return is guaranteed the moment you transfer the funds.

Source:

https://unitymoney.co.nz/invest-and-save/term-deposit/are-term-deposits-worth-it/

Article #2: Get to know more deeply what is a time deposit (From OK! Bank Indonesia)

By OK! Bank Indonesia, March 22, 2022

Time deposits are no less profitable than many investment instruments that are currently on the rise. Although it has been circulating in the community for a long time, there are still many who do not understand what time deposits are. In fact, this banking product is ideal for customers who want to keep their money safe.

What is a Time Deposit?

Time deposits are banking products that have a time period for withdrawing funds. The withdrawal period is according to a predetermined agreement, ranging from 1, 3, 6, and 12 to 24 months. Customers are free to determine the time of withdrawal according to their wishes or needs.

Time deposits can be made on behalf of individuals or institutions. Of course, the requirements for opening this banking product are different based on the ownership. For individuals, they just need to attach their KTP/Passport and NPWP, as well as KITAS if the owner is not an Indonesian citizen. Meanwhile, for institutions, they must prepare a company legality deed to open a time deposit account.

Time deposits are not only useful as savings, but also investment instruments. The resulting profit is more stable than other instruments, such as stocks or bonds. The risk of investing in deposits is also lower, so it is categorized as a low-risk investment. As a banking product, the risk of deposit is lower because the bank that provides it is guaranteed by the Deposit Insurance Corporation (LPS).

Interest rates in time deposit products are higher than ordinary savings in general. The longer the deposit funds are kept, the higher the deposit interest rate. When you take the funds, you will get funds that are many times larger than when you made the initial deposit.

Unfortunately, you can only withdraw the funds at the agreed time. Withdrawing deposit funds prematurely can result in fines so that the profits obtained are less than the maximum. In addition, the name of the depositor must match the name listed on the deposit slip.

Characteristics of Time Deposits to Understand

Time deposits have their own characteristics that make them different from other banking products. What are the characteristics of time deposits that the public should know?

1. Minimum

Deposit The minimum deposit to open a time deposit account is larger than regular savings. Usually, the minimum deposit is around IDR 5 million, but each bank has a different policy. OK! The bank itself requires a minimum deposit of IDR 8 million for individuals or institutions who wish to open a time deposit account.

2. Used as Collateral

This characteristic of time deposits is rarely known to many people. You can use deposits as alternative collateral for loans to banks. Unfortunately, not all banks are willing to accept time deposits as collateral. Of course, make sure that you have other assets in addition to deposits to be used as collateral first.

3. Interest Rates for Time Deposits

Why are the interest rates on time deposits higher than savings accounts? The reason is that the deposit period provided by the bank for customers holding deposits is larger. However, you should know that the deposit interest rate is actually set according to LPS policy, so it cannot be higher than that number. Stay alert if there are banks luring deposit rates higher than the LPS provisions.

4. Taxable Banking Products

You should be aware that time deposits are taxable products. The set tax ranges up to 20% and is deducted when withdrawing funds. This should be discussed with the teller bank when opening a time deposit account so that you can estimate the final profit that will be received.

After understanding what a time deposit is, are you interested in opening? OK! The bank has a time deposit with various advantages, one of which is competitive interest rates. The requirements for opening an account are quite easy, prepare an identity card and NPWP, then contact OK! Bank to register your deposit. Experience a bright future by having a time deposit account at our bank.