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Why you should consider time deposits

As a start-up, where you decide to keep your business profits is important
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As a start-up entrepreneur, where you decide to keep your business profits is important.  Do you keep in a bank or reinvest it back to the business? Get more for your money by investing it in a time deposit, which will give you a higher interest yield than a savings or a checking account.

Time deposit is one of the financial services that a bank offers to its clients. It is defined as a “deposit of funds in a savings institution under an agreement stipulating that the funds must be kept on deposit for a stated period of time, or the institution may require a minimum period of notification before a withdrawal is made.”

Time deposits pay interest at a higher rate than the regular savings deposit, checking, or money market accounts. However, time deposits cannot be withdrawn anytime prior to maturity date without paying a penalty.

Usually 30 days is the standard holding period for time deposits. But one can opt for a longer term –- such as 60, 90, 180, 270, or 360 days at higher rates. As to how long one should hold a time deposit, it will depend on the individual’s needs. If a depositor wants to earn from his time deposit, he must not touch his account if he could help it.

A time deposit account can be opened with as little as P5,000 for banks like the Development Bank of the Philippines. Interest rates can start from 3.75 percent interest annually depending on the bank.The interest rates go up the longer the term is. There are terms ranging from 90 days to 179 days as well as 180 to 269 days, or 270 to 360 days.



This article was originally published in the June 2006 issue of Entrepreneur Philippines.

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