Term deposit accounts are the specific deposit accounts for which account holders can withdraw money only after a specified period of time. These accounts are also known as fixed deposit due to fixed tenure involved in the same and money cannot be withdrawn for a fixed period of time before the maturity date under normal circumstances. The interests earned on these accounts are relatively higher than the normal savings deposit accounts as money is blocked with the banks for higher duration. Different types of term deposit accounts are specified below
Fixed Deposits: Fixed deposits enables account holders to save their surplus money for a fixed tenure which offers them higher rate of interest. The interest rate and maturity date are fixed earlier and the interest rate is considerably higher than the saving account interest rate. In some countries, fixed deposits are encouraged to increase savings by offering tax benefits by the Governments.
Certificate of Deposits (CD): Certificate of deposit is a special type of term deposits which enables the CD bearer to earn interest on the amount specified in the Certificate of Deposit. A CD has a maturity date, a pre-fixed interest rate and can be of any value which is issued by commercial bank and insured by the FDIC (Federal Deposit Insurance Corporation) in US.
Retirement accounts: Retirement account is another type of term deposit accounts offered by the banks which enables the customers to save money to use them after their retirement. It also offers tax benefit to encourage people to save for their future. These accounts are mostly used by the employers to deposit pension money for their employees.