Term deposit - Financial definition
Concise definition of the term term deposit
A term deposit is a fixed-term investment where funds are deposited with a financial institution for a specified period, typically offering higher interest rates than regular savings accounts.
Comprehensive definition of the term term deposit
In finance, a term deposit is a type of investment where an investor deposits a specific amount of money with a financial institution for a predetermined period, ranging from a few months to several years. Term deposits are commonly used by individuals and institutions seeking a secure and predictable return on their investment, as they typically offer higher interest rates compared to regular savings accounts. Time deposits and certificates of deposit (CD) are types of term deposits.
These investments provide a guaranteed rate of interest for the duration of the deposit, and the principal amount is generally inaccessible until the end of the term, although early withdrawal options may exist with penalties. Term deposits are considered low-risk investments, making them popular among conservative investors looking to preserve capital while earning a modest return.
They are commonly offered by banks, credit unions, and other financial institutions, and are insured up to certain limits by government deposit insurance schemes in many countries. Term deposits are used for various purposes, including short-term savings goals, retirement planning, and diversifying investment portfolios.