What is a bank deposit account and what types is it?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Banking services are used by almost all legal entities, as well as many ordinary people. Sooner or later, they have a question: “What is a deposit account in a bank?” The answer to it is quite simple: this is a current account in a bank where the client keeps his money, and the bank, in turn, pays him for this in the form of interest on the amount of the deposit. A deposit account is sometimes called a deposit or deposit.

In other words, it can be summarized that a bank deposit account is a way to save and increase your money using the services of financial institutions.

History of Appearance

Greece is considered to be the channel in which the first principles of deposit accounts began to emerge. At a time when there were no modern financial institutions and no awareness of what a deposit account in a bank was, people kept their we alth in temples. They put their goods in pots, wrote their name and date. At the same time, the temple assumed the obligation to preserve the values, but at the same time took a reward for such a service. It was more like today's servicesaving valuables in individual deposit boxes provided by banks.

At a time when more and more people kept their savings in gold coins, the so-called "changers" appeared. They kept money for a certain reward. Then they realized that the gold coins that they keep can be given to other people in the form of a loan and make money on it. At that moment, the first principles and understanding of what a bank deposit account was was born.

When the depositors found out that money changers earn on their money, they wanted to have some dividends from this. From that moment on, the principle of calculating interest for placing a deposit appeared.

There are several types of deposits. This article discusses the most popular of them.

What are the types of deposits by maturity?

According to this criterion, they distinguish:

1. Demand deposits.

This is a type of deposits, the terms of which state that the deposit agreement has no expiration date, that is, they are unlimited.

2. Term deposits.

These deposits have a fixed term. Often contracts are concluded for 3, 6, 9, 12 and 24 months, but other options are possible. Such deposits can be returned ahead of schedule, if this is provided for by the agreement.

What are the deposit withdrawal methods?

Deposits can be divided into the following types according to the method of withdrawal of deposit funds:

1. At the end of the term completely.

Such deposits cannot be withdrawn ahead of schedule, except when the client terminates the agreement with the bank. But in this case, there will be a pen alty in the amount of interest that the bank will withdraw from the client for violating the terms of storage of funds that were specified in the contract.

2. Partial withdrawal possible.

Deposit accounts with this option give the client the right to partially withdraw funds from the account, as needed. At the same time, no pen alties will be applied to him by the bank.

Deposit funds can be withdrawn both through the bank's cash desk and by bank transfer to a card or current account. For this, the bank may charge an additional commission.

How is interest calculated on deposits?

Deposits according to the method of accrual and payment of interest are divided into:

1. Deposits with interest payment at the end of the term.

This implies that the interest that the bank charges on the deposit amount is issued to the client during the payment of the deposit body at the end of the term.

2. Deposits with capitalization.

Such deposits are considered more profitable than the previous ones. The terms imply that every month the bank adds the interest accrued to the client on his deposit to the body of the deposit, that is, from the next month, interest will already be accrued on a large amount.

To better understand what a bank deposit account is, you need to divide deposits according to the conditions for extending the terms of storage (or a deposit agreement):

1. No renewal.

These deposit agreements are not renewed afterare over. Deposit funds will be kept in a bank account without accruing interest until the client withdraws them.

2. With prolongation.

Today, the prolongation of deposit agreements is a demanded and popular service. After the expiration of the term, the deposit is automatically re-placed for the same period for which the agreement was concluded, but at a new deposit rate. Very often, banks have loy alty programs that increase the standard interest rate from 0.5 to 1% for renewal, which is more beneficial for customers.

According to the method of replenishment, deposit accounts are:

1. Refillable.

Such deposits can be replenished at any time, which is very convenient if there are additional funds that a bank client also wants to deposit into such an account.

2. No replenishment option.

This type of deposits cannot be replenished, which is prescribed in the contract for opening a savings account.

Which deposits are the most popular?

Following the example of Russian banks, we can conclude that the most popular is the classic deposit account. Alfa-Bank charges the largest percentage on such a deposit, compared to other types of deposits. Classic are those that are placed for a certain period without the possibility of partial withdrawal.

In order to open a bank deposit account, a person usually needs to bring their passport and tax identification number with them.