Fixed term account 

A fixed term account (also known as time deposits, term deposits, deposits with an agreed maturity etc.) is a good alternative if the depositor is prepared to tie up the deposited funds for an agreed period of time.

The interest paid on a fixed term account varies according to the deposited amount and the deposit period. Usually the larger the deposit and the longer the deposit period, the better the interest on the deposit.

Risks

A deposit in a fixed term account cannot generally be withdrawn or the contract terminated before mauturity. The contract terms and conditions indicate whether and in which circumstances the funds can be withdrawn before maturity. The terms and conditions of a fixed term account cannot generally be changed. If the funds may be withdrawn before maturity, the interest rate agreed in the contract will not generally be paid, and it is also possible that the interest is not paid at all. The bank may also levy other charges if the funds are withdrawn before maturity.

Deposits made at a deposit bank involve a low risk. The depositor does not generally have a risk of losing the initial amount deposited in a deposit account. Finnish deposit banks are members of the Deposit Guarantee Fund which compensates for deposited funds to up to EUR 100,000 in case of a bank’s insolvency. Deposits at branches of foreign deposit banks operating in Finland are subject to the cover scheme offered in their home state, and the terms and conditions pertaining to such schemes should always be checked separately before making a deposit.

For further information on deposit guarantee, see the link on the right of the page.

Funds in a deposit account are exposed to inflation risk if inflation is higher than the interest paid on the deposit, and to exchange rate risk if the deposit is denominated in foreign currency.

24 April 2014