Time deposit

For an article more specific to the United States, see Certificate of deposit.

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A time deposit (also known as a term deposit, particularly in Canada, Australia and New Zealand; a bond in the United Kingdom; fixed deposits Fixed Deposits in India and in some other countries) is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time (unless a penalty is paid)^{[citation needed]}. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product.^{[citation needed]}

The opposite is a demand deposit also known as sight deposit or "on call" which can be withdrawn at any time, without any notice or penalty; e.g., money deposited in a checking account or savings account in a bank.

The rate of return is higher than for savings accounts because the requirement that the deposit be held for an integer multiple of the term gives the bank the availability to invest it in a higher gain financial product class. However the return on this type of product is generally lower than that of investments in riskier products like stocks or bonds.

A deposit of funds in a savings institution is made under an agreement stipulating that (a) the funds must be kept on deposit for a stated period of time, or (b) the institution may require a minimum period of notification before a withdrawal is made.

US time deposits regulations

The "M2" definition of money supply includes funds that can be used directly in payment, such as money market mutual funds and money market deposit accounts (MMDAs). MMDAs are considered by the United States Federal Reserve (the Fed) to be savings accounts and are thus exempt from reserve requirements. These large transaction accounts not being included in the M1 money supply suggests that the Fed does not pay much attention to ordinary deposits, and in July 2000, it announced that it was no longer setting target ranges for growth rates of the money supply.

Small-denomination time deposit

"Small" time deposits in M2 are defined as those under $100,000.

Large-denomination time deposit

"Large" time deposits are currently defined as deposits larger than $100,000. The term "jumbo CD" is commonly used in the United States. Some banks, recognizing that customers do not want more in the bank than is covered by insurance, have lowered the "jumbo CD" minimum requirement to $95,000, so with compounded interest the total falls below the insurance limit.

See also

• Certificate of deposit
• Guaranteed Investment Certificate
• Federal Deposit Insurance Corporation
• Money supply

External links

• FDIC: Your Insured Deposits
• International Time Deposits