Term Deposit Interest Rates: Some Basic Details

By Author: Vijay K Shetty
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Term Deposit is a kind of Savings Account which is taken for a predetermined time period to save or invest money. In general a certificate is issued against the term deposit because in this investment structure a certain amount of money is invested for a specific time frame. This time frame can vary from one bank to another. For example, a term deposit time frame can be from 3 months up to 10-years. Making calculation for best term deposit interest rate is an intricate issue. It involves calculation of several factors like term value, deposit requirements, lock-in period, nature of interest rates, etc. Otherwise it is difficult to evaluate the proper scale of term deposit interest rate.

Lock-in period is one of the major factors to be considered in the term deposit interest rate. During the lock-in period, the term deposit holder cannot access his/her money and that makes the difference. This lock-in period is of two types, one is an initial lock-in period (but earlier than term is over) when the money cannot be withdrawn at any cost and the second variant of lock-in period is the entire period of the term deposit when ...
... the money cannot be withdrawn until the total time frame is over.

In general, if due to some unavoidable reason, money is withdrawn from the term deposit account, it attracts some sort of penalty. These fees are in general a percentage of the total amount that was put in the fixed deposit although the amount and the conditions of penalty largely vary from one bank to another. The clauses and conditions bear utmost importance for a term deposit and the appropriateness and justifiability need to be considered before coming into selection of a term deposit investment.

In term deposit interest rates, the money is invested for an initial period and then it can be reinvested after a certain time on a recurring basis. This ladder system fetches better amount of interest rates in comparison to long term investment at a stretch for term deposit investment process. In this interest rate system, the term deposit interest value remains higher and the account holder can escape the formality of lock-in period. In certain cases such types of term deposits are also called auto renewal term deposits. On discretion of the user the interest rate can be deposited back to account or in certain cases the interest accumulated can be forwarded with further investment in auto renewal process.

It is always wise to compare the prevailing term deposit options offered by different banks. Online search is a convenient way to start search and almost instant process to find out the best deals on term deposit interest rates.

Vijay K Shetty,
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