The term of deposits is often used in many financial institutions such as the bank. These are part of their products and services they offered. Bank deposit can be divided into 2 major categories, namely demand deposits and term deposits.
In short, a demand deposit is a sum of money or fund given to the bank/financial institutions held in an account and it can be withdrawn by the depositor at anytime. The withdrawal of the fund itself can be made without notice. Other terms and/or types are known for demand deposit is checking account, savings deposits and current accounts. The amount can be deposited at any time during banking hours and it can be also withdrawn from the bank during banking hours and through automated teller machines (ATMs) as well as online twenty-four hours a day
A term deposit is a sum of money or fund held in financial institutions that have a fixed period of time. Term deposits, also known as time deposits. It is also known as representing fixed deposits, recurring deposits and reinvestment deposits. These are investment deposits made for a predetermined period of time, ranging from a minimum seven days to maximum ten years. The depositor receives a predetermined rate of interest on the term deposit over the specified time period. Funds deposited for longer time periods command a higher interest rate. In the term deposits, the funds cannot be withdrawn until the end of the chosen time period without incurring a financial penalty, and withdrawals often require written notice in advance. At the end of the time period, the depositor has the choice of withdrawing deposited funds plus earned interest, or rolling over the funds into a new term deposit. The most common form of a term deposit is a bank certificate of deposit or CD.
From the interest rate, the term deposit accounts commonly pay a higher rate of interest than traditional savings accounts of demand deposits. In addition to that, the demand deposit accounts offer greater liquidity and ease of access as compared to term deposits. Demand deposits pay lower interest rates and they may also include various fees for handling the account. Depositors can withdraw any or all of the funds in a demand deposit account at any time without penalty or prior notice required.
It is the opposite with the term deposit, the access for the fund is limited. Unless the fund is withdrawn during the end of the period, the financial penalty will occur. In addition to that, if the depositors want to withdraw the fund, either aligned with the time period or not, they need to do that the notice should be in advance. Generally, it does not require handling fees.
Thus, for anyone that requires greater access to the fund, it is advisable to choose demand deposits. Funds a depositor may need to access at any time that provides the depositor with sufficient personal liquidity to handle his regular expenses should be kept in a demand deposit account. Examples of demand deposit accounts include regular checking accounts, savings accounts or money market accounts. The term deposit can be used for short-term investment because it has the advantage of higher interest.