Fixed term is one of the so-called “term deposits”, these are defined so that the money is invested for a certain period. Since the credit can not be accessed during the investment period, time deposits are used exclusively for investment purposes. Early access to the balance is associated with costs. In most cases, all interest that has already been earned is lost. Of course, the consequences of the interruption or the termination of the fixed-term deposit are also dependent on the provider.
Investment on the deposit account
Time deposit accounts are therefore less suitable for short-term investments than for medium to long-term investments. That also makes them less flexible. In return, there is a fixed interest rate on the credit, which applies for the entire term.
Time deposit maturities
The terms of time deposit accounts can vary greatly depending on the provider and vary from 30 days to 10 years. The greatest profit can be consistently achieved if you invest a large sum as long term as possible. The minimum amount for opening a time deposit account is 5,000, – € for most banks.
After the end of the term, the investor has the choice how he wants to proceed with the money. In most cases it is possible to extend the term and to invest the money together with the interest income and thus to achieve a compound interest effect. Or the capital is transferred to a reference account, which gives the investor access to it again.
Good interest rate
The level of interest on the fixed-term deposit depends above all on the general level of market interest rates. But also the amount and the duration of the Geldanlange affect the interest rate. This will be fixed over the agreed investment period. The pre-determined interest rate eliminates the risk of interest rate fluctuations and allows investors to benefit from a high interest rate even in periods of low interest rates. Of course, a fixed interest rate can also be detrimental: Fixed-income investors can not take advantage of rising market rates.
Use the interest rate stairs
The investment process of the so-called “Zinstreppe” offers a possibility to elegantly compensate for the lack of flexibility of fixed term deposits. In this process, the credit is divided into, for example, three equal amounts, for which contracts with a staggered maturity of one to three years are then concluded. The investor receives a payment in this way every year. If he does not need the money at the time, he can put it back on a time deposit account with a term of three years and so continue the interest rate stairs.
The advantage of this method lies in the increased flexibility of the investment, whereby the money is available to the investor, at least on an annual basis. In addition, a rising market interest rate can be taken in this way, since the interest rates are adjusted in a new contract. Of course, that means, conversely, that falling market interest rates can not be avoided.
Deposit insurance up to 100,000, – €
Investments on a time deposit account are – as with the money market account – secured by the deposit guarantee up to a maximum of 100,000, – €. Since deposit insurance is available throughout the EU, savers can use the offers of European banks to open a time deposit account as well as the offers of German banks without fear of loss. When comparing the offers and non-German banks to take into account, can be quite profitable, because foreign banks often offer time deposits at very attractive rates.
Especially with very high investments it is worth comparing the security offered by the banks. Many institutions guarantee their investors a hedge that (far) exceeds the prescribed € 100,000.
Who benefits from a time deposit account?
The investment of fixed-term deposit is interesting for those who want to invest their money safely and in the medium term are not dependent on their credit. With the fixed interest rate, investors already know at the beginning what profit they will make with their investment.
In general, investors who want to invest a large amount are well advised to split the amount and invest in different ways in order to maximize returns. Even those who want to invest exclusively in fixed deposits for security reasons, can benefit from the distribution of the sum to different deposit accounts.
Bank comparison on the Internet?
The easiest way to find the right deposit offer is to search the internet. This is especially useful because many providers with very good conditions are direct banks without their own branch network. An account can be opened online here within a few days and via the Postident procedure.
Consumers should be aware, however, that many comparison portals are not as independent as they appear and, in many cases, place providers at the top of the bottom line, which are particularly solvent and provide good commissions to the portals. It is therefore not enough to compare interest rates and investors should take a close look at all the terms and conditions of the banks before deciding on an account.
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