Savings is a safe and popular form of investment, chosen by many people. However, many people wonder whether to deposit savings with a term or without a term to get the best return on money. Below is information for customers to refer to, from which to make the most appropriate choice.

What are term and non-term deposits?

Term deposits are customers' idle money deposited at a credit institution for a certain period of time according to an agreement. Customers can choose flexible deposit terms by week, month, quarter or year. When the term ends, customers will receive back the entire principal and interest at the interest rate agreed with the credit institution.

For example, a customer deposits 30 million VND in the bank for a 6-month term, with an interest rate of 6%/year, and the final settlement date is June 30. On June 30, the amount the customer receives is:

Interest: 30,000,000 x 6%/365 x 180 = 887,671 VND.

Total accumulated amount (principal + interest): 30,000,000 + 887,671 = 30,887,671 VND.

In case the customer does not make the final payment on June 30, the entire amount of VND 30,887,671 will be renewed (deposited) into a new 6-month term (assuming 180 days) and continue to enjoy an interest rate of 6%/year (assuming the bank does not change the interest rate at the time of renewal), the new final payment date is December 31. So by December 31, the amount the customer will receive is:

Interest: 30,887,671 x 6%/365 x 180 = 913,937 VND.

Total accumulated amount (principal + interest): 30,887,671 + 913,937 = 31,801,608 VND.

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Savings is a safe and popular form of investment chosen by many people. Photo: Nam Khanh

The case of adding interest to the initial capital for renewal as above is called principal interest. Customers can take advantage of principal interest to increase the capital and interest after many accumulation periods to receive a much larger amount of money later.

In addition to term deposits, banks also support non-term deposits for individuals who are uncertain about the deposit period.

Non-term deposits, also known as non-term savings deposits, are the amount of money that customers deposit at the bank, without being bound by a minimum balance in the account. In fact, the amount of money in the customer's payment account is a non-term deposit.

Interest on demand deposits is calculated based on the actual number of days the customer deposits money into the account and the bank pays interest periodically every month/quarter.

When making a term deposit, customers are still allowed to withdraw the deposit before the maturity date. If it is not really necessary, customers should not withdraw because the interest rate for the amount withdrawn before the maturity date will be calculated according to the interest rate for non-term deposits, lower than the fixed interest rate as originally signed.

Therefore, if you cannot guarantee your future financial resources, you should choose a shorter term and only deposit in longer terms when stable to ensure maximum interest rates.

Difference between term and non-term deposits

The two forms of term and non-term deposits have some differences as follows:

Regarding term , term deposits have a fixed period (1 month, 3 months, 6 months, 12 months...). Non-term deposits do not have a fixed period.

Regarding interest rates , term deposits receive interest rates from 3-7%/year, depending on the bank. Meanwhile, non-term deposits receive much lower interest rates, only from 0.1-1%/year, depending on the bank.

Regarding the minimum deposit amount , term deposits require a deposit of 1 million VND or 100 foreign currency units depending on the bank. Non-term deposits only require an amount of 50,000 VND.

Regarding the method of interest payment , term deposits pay interest at the end of the term, periodically (monthly, quarterly, annually), and pay interest in advance (at the time of deposit). Meanwhile, non-term deposits pay interest periodically (monthly, quarterly, annually), and pay interest at the time of settlement.

Regarding the possibility of early settlement , term deposits can be settled early but the bank must be notified and the withdrawn amount will only receive non-term interest, the remaining amount (not withdrawn) will receive interest equal to the time of initial deposit registration.

Non-term deposits can be closed at any time and still enjoy the original non-term interest rate.

In terms of risk , term deposits enjoy a fixed interest rate throughout the term, minimizing the impact of market fluctuations. As for non-term deposits, if the bank reduces the interest rate according to market fluctuations, the interest rate will also decrease.

From this, it can be seen that the benefits of safety and interest rates of term deposits will be higher than that of non-term deposits. However, non-term deposits will be more flexible and suitable for customers who need to withdraw capital at any time.

Therefore, depending on the needs and financial capacity, customers can choose the appropriate form of savings.

(Article based on advice on Techcombank's website)

How to calculate the interest received from savings, accurate to each dong Savings interest is calculated in many ways, depending on the form of savings. Below is a simple and accurate way to calculate savings interest, readers can refer to.