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How To Open A Time Deposit Account

Get a step-by-step guide on how to register for a time deposit account.

Are you tired of low-interest rates from your current savings account? Are you up for investing your money for higher returns with higher demands? If you are, then a time deposit bank account is the next step to the banking game!

It might sound new and possibly hard to do, but with this guide, you might get the hang of it!

Something you need to know:

Time deposits are sometimes called term deposit. When you open a time deposit account, the bank locks your money in for a period called the lock-in period or maturity. You can pick a maturity period from 30 months to 1 year, and even more. During this time, you’re not allowed to withdraw anything from your balance. Doing so will cause pre-termination fees that will be deducted from your account. After maturity, you can choose to:

  1. Automatically roll over your deposit and the acquired income for the same lock-in period,
  2. Withdraw your income and roll over your initial deposit, or
  3. Withdraw everything from the account if you’re satisfied with the return.

Some banks allow a wide range of options for how much you can invest in them. Your account is insured by the Philippine Deposit Insurance Corporation (PDIC) for up to ₱500,000. The higher the balance and the longer the maturity, the higher the interest will be. A 20% income withholding tax is imposed on your interest-earning balances or your return from your initial deposit. The effective benefit from any time deposit account is 0.80 of the advertised digits.

time deposit

How to open a time deposit account?

You might think that your current bank will be the most convenient option to start a time deposit account. However, it pays more to research different banks and their time deposit interest rates if you want the best bang for your buck. GoBear can help you find the banks with the highest interest rates for time deposits or compare banks and rates according to your preferences!

The following are properties of the ideal time deposit account:

  • Low minimum earning deposit

Most banks’ minimum interest deposit start at ₱100,000. This is a con for those who want to open a time deposit account for less. Good thing the Philippine Bank of Commerce (PBCOM) allows you to open a time deposit account for as low as ₱1,000! However, the step-up in the interest rate comes at the ₱100,000 mark. Thus, you’re stuck with a maximum of 1.75% interest before the maximum of 3.50% for ₱100,000. If you settle for a low maturity period, you’re earning interest comparable to a more flexible and convenient savings account.

If you have a slightly higher budget, then an EastWest Peso Time Deposit account will work best for you. You’ll earn a 2.635% interest when you lock at least ₱10,000 for a year! The interest steps up to a high 3.90% when you reach a ₱100,000 balance.

  • Low minimum maturity period

Thirty days is the minimum lock-in period for most banks. It’s more advisable to lock your money in for a long time because that maximizes the interest you can get for your money. However, if you’re worried about locking your money in for too long, then this is an option to consider. Find a bank that offers an opportunity for a short lock-in period. That’s helpful to people who don’t have any emergency funds besides the savings they’re investing.

  • High-interest rates

If you have at least ₱100,000 to deposit initially, there are much plenty of fantastic options for you. If you’re willing to lock in your money for at least a year, then your earning chances are higher too. The highest interest rate for ₱100,000 is 5.00% per annum for a 5-year lock-in period in Security Bank. By the end of 5 years, your initial deposit would be ₱127,628.16! If you want a lower lock-in period, Security Bank offers the highest interest rate too! Time deposit interest is compound. This means that the interest from your initial deposit is added as a regular part of your balance. The bank applies interest after maturity. This is how you earn more if you rollover your balance for multiple maturity periods. If you automatically roll over your initial deposit and the acquired interest, the compounded interest formula should help you foresee the outcome.

  • Lenient early termination fees

If you don’t have a separate emergency fund or if you need to withdraw your time deposit early, high pre-termination fees are your enemy. You’re not supposed to terminate your deposit early, but it’s nice to have lenient charges in case of emergencies. After considering your earning options, ask the bank about pre-termination fees too. Some banks even need at least one week to process early-termination requests, so note about that also. Plan your budget and emergency funds accordingly to make the best out of your banking experience!

Tips to maintaining (and possibly growing) a time deposit account

  • Find the most convenient banking terms. Everyone has different budgets and spending habits. Quantify yours and agree to the terms of your time deposit account. Pick a bank whose policies and fees and comfortable to your budget.
  • Plan a careful budget before you open an account. Locking in a massive chunk of your savings take away your capability of spending on unnecessary extras. If you’re worried about emergency fees, you can consider a credit card to provide a small stretch on your budget. Preparing for emergencies will help you avoid early account termination.
  • Save regularly. Don’t rely on compounded interest! Saving regularly increases your balance and consequently, the interest you earn! You can deposit more money into your account every time your balance rolls over to another maturity period. To help you visualize your earnings, you can use the future value of annuity formula.

Bottom Line:

Choosing a bank to invest your money in is a crucial step to opening a time deposit account. You have plenty of options for all kinds of budget and preferences. Compare different time deposit accounts with GoBear today, and start your journey to passive earning through interest rates!

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