What are regular savings and cumulative deposits?
Regular savings are savings in which the principal amount and interest rate, deposit term and payment method have been agreed upon at the time of deposit.
Savings usually support a minimum deposit of 500,000 - 1,000,000 VND depending on the bank. The maximum deposit term of banks can be up to 15 years. Because the principal amount and deposit term are fixed, the bank supports flexible interest payment methods for the account holder to choose: prepayment, periodic and end of term. Of which, the end of term interest rate is the highest, and the lowest is receiving interest in advance.
Cumulative savings is a form of savings that allows depositors to increase the principal amount by depositing more money multiple times during the term. Currently, banks support a minimum savings deposit of VND 100,000/time, including the first deposit.
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With the form of cumulative savings, the depositor will receive interest based on the actual interest rate specified by the bank's deposit term throughout the deposit term. Because the interest rate cannot be predicted accurately and the principal increases continuously throughout the deposit term, the bank will summarize the interest at the end of the term and pay the depositor in full. The term of the cumulative savings book supported by banks must be at least 3 - 6 months, depending on the bank.
Advantages and disadvantages of regular savings and cumulative savings
Each form of savings has its own advantages and disadvantages.
Regular savings have the advantage of higher interest rates than cumulative savings and are not subject to market fluctuations. The minimum term is 1 week for online deposits. However, regular savings have the disadvantage of not being able to add capital unless the old term expires. And the initial deposit must be large enough if you want to receive high interest.
The advantage of cumulative deposits is that the initial deposit does not need to be too large, and the capital is supplemented flexibly every month. Interest is compounded monthly due to the increase in the periodic capital. The minimum term is short and flexible. The disadvantage of the form of cumulative deposits is that the interest rate is lower than that of regular savings deposits.
Factors determining regular savings or accumulation
To consider choosing regular savings or cumulative savings, customers need to base on the following factors:
Desired interest rate
Each form of savings has its own advantages in terms of interest rates. Specifically, regular savings have a fixed interest rate because only a fixed amount of money is deposited and does not depend on market fluctuations.
Meanwhile, the interest rate on accumulated savings can change according to the deposit term depending on the policy of each bank. However, because the interest is accumulated monthly, the longer the deposit term, the more interest the customer will receive.
Flexibility
Flexibility is also one of the issues to consider when choosing a form of savings. In particular, regular savings do not have a high level of flexibility, customers can only deposit money when the old term expires or are required to close it before the term and then open a new savings account.
Savers can easily start with a small amount of money, add capital periodically and withdraw capital flexibly.
Thus, depending on individual needs and initial amount, each customer can choose the most suitable form of savings. Regular savings are suitable for those who have a large amount of idle money, do not need to use it for a long time and want a fixed interest rate, less fluctuating with the market. Accumulated savings are suitable for those who do not have much money but have a regular monthly income such as salary, allowance...
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