Fixed-term deposit is a time deposit. The customer and bank agree on a fixed interest rate for the entire term.
The term can be from one month or – this is rather the exception – up to several years. Fixed-term deposits are therefore a time deposit: the saver can invest their money up to a certain date. He knows when the money is due to be paid out and can calculate with the return agreed in the contract. In contrast, the overnight money is basically available to the customer on a daily basis, but its interest rates can also change daily and are usually lower than with the fixed-term deposit.
Possible goals: When can the fixed deposit be useful for me?
Fixed-term deposits are usually suitable for a rather short-term investment , for example if you want to “park money” that you will only need for an investment at a later point in time. You can also use fixed-term deposits to build up assets or as part of your retirement provision. Since price fluctuations have no effect on fixed-term deposits, it is a particularly safe way to invest your money.
Risks: What are the risks?
Exchange rate risk /business risk: This risk does not exist with a fixed-term deposit because the interest rate is fixed from the start and the return can therefore be calculated. Losses generally cannot arise, your capital is preserved. The return cannot change either, as the interest rates are fixed for the agreed investment period.
Foreign currency risk: You can avoid this risk by opting for a time deposit in dollars.
Availability /liquidity risk: As a rule, you cannot dispose of your money early during the term. If the credit institution allows this in exceptional cases, this can have negative interest rates, or the institution may demand a so-called early repayment penalty from the customer. All of this reduces the yield of a system.
How are the performance, profit and benefits of the fixed-term deposit structured?
Depending on the term, you will receive an interest rate that is based, among other things, on the respective market interest rate, i.e. the refinancing rate of the credit institutions. With fixed-term deposits, the interest is fixed at the beginning of the term for the entire duration of the investment and is therefore guaranteed, so when you conclude the contract you know what interest you can expect. The fixed-term deposit thus offers a high level of planning security. However, the agreed interest rate can vary from institute to institute. Therefore, pay attention to special offers! But be careful: once the campaigns to acquire new customers are over, the attractive interest rates offered can deteriorate significantly after such a market offensive.
What obligations do I have towards the bank?
You need a so-called reference account for all deposits and withdrawals from your fixed-term deposit account. The reference account is usually your normal checking account.
Keep an eye on the expiry time of your fixed-term deposit: You may have to terminate or extend the investment in good time – depending on what you have agreed with your provider in the contract. If you do not observe this and do not respond in good time, you can run a liquidity risk: The bank automatically extends the fixed-term deposit at the then applicable interest rate (which may be lower) and you will not receive the money even though you actually needed it.
When can I access the fixed-term deposit?
You will receive the money you have invested and the interest on it at the end of the term by crediting it to the reference account that you have agreed with the respective bank.
What information does the bank have to provide me with?
The bank is legally obliged to inform its customers about the conditions in accordance with the Price Indication Ordinance and to point out how the deposit protection is regulated.
Where can I invest time deposits?
Hard money you can with a credit institution to create. You can get information and advice in the branches, online or by telephone from the respective provider. Think in advance how long and for what purpose you want to invest money and check the offers carefully.
Who is the fixed deposit suitable for?
Since the interest is firmly agreed and guaranteed, the fixed-term deposit offers a high level of planning security. It is therefore suitable for those clients who prefer a more conservative, safe investment to preserve their assets.