Bank Term Deposit; What Purposes Does It Serve?

Bank term deposit is a monetary deposit at a financial institution that is held for a fixed term and cannot be withdrawn until after the expiration of the term agreed upon by the parties usually the financial institution and the customer. When the term or duration for which the deposit is held expires, it can either be withdrawn or held for another additional term. In most cases, the longer the term for which the deposit is held, the better the financial yield. Many banks offer term deposits in Australia so investors have a wealth of choices on their hands. There are various types of bank term deposits. These include the revolving bank term deposit that allows a financial institution to retain the monetary balance in the customers current account at the roll over date as specified by the customer. The financial institution will automatically transfer any fund that is above the limit to the specified term deposit. The other type of term deposit is the unchanging term deposit. The unchanging term deposit is where the amount that was deposited remains unchanged throughout the period and the interest earned is credited to the principal sum at every rollover. The other type of term deposit is capitalized term deposit that allows the deposit to be increased by the interest that is accrued at every rollover. A bank term deposit serves many purposes. Firstly, it allows a customer to have many options available particularly in regard to currency denomination, deposit types and terms. The deposit also allows a customer the option of changing the financial parameter of the deposit at every rollover date of the rollover deposit. Secondly, a term deposit allows an investor to increase investment earnings while at the same time offering the investor a better monetary return compared to traditional commercial and retail savings accounts. The term deposit allows an investor the option of selecting between fixed or variable interest rate thus maximizing the profits on the investments. Thirdly, a bank term deposit gives an investor the flexible financial option of receiving interest payments either quarterly, annually, semi annually or upon maturity of the term agreed upon between the financial institution and the customer. Fourthly, a term deposit also serves the purpose of acting as collateral as it can be used by customers who intend to apply for a loan in any bank in Australia. It also allows an investor the option of adding money to the deposit and reinvesting the amount for the future. In addition, a term deposit also allows an investor the option of withdrawing part of the deposited funds and reinvesting the remaining funds. The other purpose that the term deposit serves is that it gives an investor a chance to withdraw the entire amount that was invested in the financial institution. A bank term deposit is useful as it gives a customer the option of automatically transferring a fixed fund or above the limits amounts from existing current accounts term deposits. In addition, a term deposit offers investment flexibility due to the various terms that are offered to the customer. Such terms range from between one year and three years. The term deposit allows an investor the option of guaranteeing financial returns for business savings with a wide range of choice of fixed terms. Mel writes about bank term deposit, credit union and other finance topics.