What is a Term Deposit Savings Account? 5 Things You Should Know


Looking to earn fixed returns on your investment over a tenure of as little as 6 months? A term deposit account in the UK deserves your attention. Check out this post to know 5 vital details about this account.

The majority of the fixed return investment options in the UK have longer tenures. But what if you only want to invest for a short duration, like 6 months? Is there an investment option that generates fixed interest income on shorter tenures? A term deposit account can be an excellent solution for you.

With tenure options ranging from 6 months to 5 years, it is a smart choice for investors wanting to earn fixed returns. Here are 5 of the most important things you should know about this account-

1. What is a Term Deposit Account?

A term deposit account is a type of deposit account that enables the account holders to earn fixed returns on completion of tenure. The interest rate is pre-fixed and does not depend on the market conditions, like most other investment options.

You can choose from tenure options such as 6 months, 1 year, 2 years, 3 years, and 5 years. On completion of the selected tenure, you will receive the invested capital along with the generated interest income.

2. What is the Interest Rate on Term Deposits?

The interest rate varies between banks in the UK. Apart from the bank you select, the currency and tenure also impact the interest rate. Some banks allow deposits in GBP and US dollars.

The interest rate can be as high as 0.35% for US dollar deposits and up to 0.25% on GBP deposits. You can get in touch with your preferred bank to know more about their current interest rate.

3. What is the Minimum Deposit Amount?

The minimum deposit amount also varies between banks. It is as low as GBP 1,000 or USD 1,000 in some banks and as high as GBP 5,000 or USD 5,000 in others. You can contact the bank or visit their website to know more.

It is recommended that you select a reputed bank with a low minimum deposit amount as this will provide more flexibility with regard to managing your finances.

4. Who is Eligible to Open a Term Deposit Account in the UK?

You are eligible to open a term deposit account if you are above 18 years and have a valid identity and address verification documents. You can open the account individually or have a joint holder.

If you already have an account in the same bank, then the bank might verify your identity electronically based on the documents it already has. If not, then you’ll be required to submit identity and address verification documents for opening the account.

5. Can Account Holders Fully or Partially Withdraw the Deposit Amount?

No, as this is a term deposit savings account, account holders are not allowed to withdraw the deposit amount fully or partially during the tenure.

However, you do have the option to close the term deposit account prematurely, which can lead to loss of interest income.

Earn Fixed Interest on Short-Term Investments

The term deposit account is an excellent choice for anyone in the UK who wants to invest their savings for a shorter duration and earn fixed interest on the same.

Do check out the reputation, interest rate, minimum deposit, and tenure options to choose the best bank for your term deposit account.

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