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What is a deposit in simple words and what you need to know about them
Deposits are an important part of many people's financial lives. They allow you to not only save your money but also earn additional income from it. All banks offer to open deposits in different currencies, as this is one of the ways financial institutions generate income.
We explain what a deposit is in simple terms, what they are, and what their advantages are. We also show you how to calculate the profit from a deposit. This will help you understand how to use your savings effectively.
What is a deposit and what are its types
A deposit is money that a client entrusts to a bank for safe keeping and receiving a small passive income, while the institution accrues interest on the amount invested. Deposits can be different, depending on the type of currency, terms, and conditions of placement.
A deposit account is a special account that a bank opens for its client on the basis of an agreement to store money or precious metals transferred by the client for a certain period of time or indefinitely, at an agreed interest rate in accordance with the terms and conditions set forth in the agreement. By placing money, the client receives guaranteed passive income in the form of interest, and the bank uses the funds to issue loans to other clients.
What types of deposits are available
There are several types of deposits that can be classified according to various criteria.
By expiration date:
1. Term. Funds are placed for a certain period, for example, 731 days in GlobusPlus. The rate is usually higher, but the money cannot be withdrawn before the end of the term without losing interest.
2. On demand. The client can withdraw money at any time without penalties, but the interest rate is usually lower.
3. Savings. Money can be withdrawn and added at any time, and the interest rate is lower than for term deposits.
By currency:
● UAH - funds are kept in the national currency;
● Currency - money is placed in dollars, euros, etc.
By type of interest rate:
● fixed rate - does not change during the entire term of placement;
● with a fluctuating rate - may vary depending on the economic situation or the bank's decisions.
Depending on the conditions, you can open a deposit and replenish it as needed or a deposit whose amount will not change during the term of the agreement.
Advantages of bank deposits
A bank deposit is a reliable way to store and grow your own funds. Here are some key advantages:
1. Reliability. Funds are protected by the banking system and state guarantees.
2. Stable passive income. Interest on the deposit is accrued regularly.
3. Convenience. It is easy to open and manage deposits via online banking.
4. A variety of options. You can choose a deposit that meets your needs and financial goals.
How to calculate the profit from a deposit
When you have already figured out what a deposit is and how it works, it is time to start calculating the benefits you can get from it.
You can calculate the return on your deposit using a simple formula:
P = C × (% rate/100) × (T/365), where:
● P - profit;● С - deposit amount;● % rate - annual interest rate;● T - number of days of deposit placement.
For example, if you place UAH 10,000 in GlobusPlus for 93 days at 15% per annum, your profit will be:
10,000 x (15/100) x (93/365) = 10,000 x 0.15 x 0.2548 = 382.20 UAH.
The calculation will be correct if you do not replenish the deposit during the term of the agreement. Taking into account the 19.5% income tax, you will receive UAH 307.66.
As a rule, each bank offers its customers a convenient deposit calculator located on the official website or in a mobile application. It allows you to quickly choose the most favorable option for a deposit in hryvnia or foreign currency.
A deposit is a simple and effective way to save and grow money. The type of deposit you choose depends on your financial goals and needs. Using bank deposits, you receive a stable income with minimal risks.
