What is a bank deposit

Knowing what a bank deposit is can be very helpful

Despite the fact that bank deposits are well known, few people know what they really involve. To clarify any doubts that may exist, we will explain What is a bank deposit.

In this article we will discuss how deposits work, where they can be made and which are the most popular types.

What is a deposit in a bank?

To understand what a bank deposit is, we have to imagine that it is like a loan to the bank

When we talk about a bank deposit, we are referring to a savings product. Basically the client gives an amount of money to a bank, or a credit institution, for a certain period of time. Once that period has elapsed, the entity to which you gave the money returns it to you. It should be noted that the client not only recovers the initial money, but also the remuneration that has been agreed with the bank. There are several types of bank deposits, and we will discuss them later, but the most common is fixed interest. Both profit and profitability remain unchanged until the end of the term.

The profitability offered by the bank, or the credit institution, with respect to the money invested during a certain time is known as the TIN (nominal interest rate). Usually, the longer the agreed term, the higher the interest rate offered by the bank. Regarding the effective profitability of the deposit, this is called the APR (equivalent annual rate). It includes expenses, commissions and interest. This allows the purchase of products offered by different banking entities.

Where is the deposit made?

It is quite likely that it will be difficult to go to the bank branch to deposit money in the traditional way. Between work and office hours, Finding a gap in our schedule that allows us to drop off some cash takes time and can be tedious. sometimes. Even with banking agencies decongested thanks to online banking that has been created out of the overcrowding of the internet, going in person and waiting to be seen can take too long for our busy lives.

Today we have within our reach a wide range of transactions that we can do remotely. These include, for example, transfers and online payment by credit card.

But what do we do if we receive cash? This is quite common and most likely we want to store it easily, safely and with the least possible inconvenience in a bank. For this reason there are various ways that allow us to perfect the deposit, such as the option to deposit checks. In this way we do not have to carry or carry large amounts of cash, which can be uncomfortable for many people.

In addition, ATMs (multifunctional automated teller machines) have existed for many years. These allow you to carry out a large number of different transactions, among which is the option of making deposits. Depending on the method we are going to choose, we will need different things. However, the cashier himself will provide us with all the instruments that we will need. Of course, it does not hurt to carry a pen or pencil just in case.

Types of bank deposits

There are different types of bank deposits

Without place to doubts the favorite savings product of the Spanish are bank deposits. And it is not surprising, because its operation is very simple. As we have already explained previously, the client simply has to deliver money to a bank during a certain period of time. When that term expires, the bank returns the invested money and the interest that they had initially agreed upon. Easy right?

The advantages of deposits they are very solid, especially in troubled times. We are going to list some of them:

  • They have a guarantee granted by a deposit guarantee fund.
  • They are quite transparent.
  • It is very easy to hire them and follow up later.
  • They have different types of time horizons, as we can find long, medium and short term deposits.

In addition, there are different types of bank deposits. It is only a matter of looking for one that suits our needs and objectives. Next we will talk about the main bank deposits.

Demand bank deposits

The best known bank deposit is the so-called "on demand". It is also the most liquid and the most contracted, because with it you can have money at all times. That is, there is no period during which we cannot touch the amount deposited. Renumbered accounts, savings and checking accounts are demand deposits in practice.

Generally, they are very simple and you do not have to meet many requirements to open one. The objective of demand bank deposits is to act as an operational support through which various operations can be carried out, such as entering an account, making a payment or a transfer, direct debit receipts or withdrawing money from an ATM. This type of deposit hardly provides profitability, to say the least.

On a regular basis, demand bank deposits involve a collection of administration fees, for overdrafts on account, for transfers, for maintenance, etc. Nevertheless, Most banks offer the customer certain advantages or bonuses if the payroll or a certain amount of bank receipts are paid by direct debit.

Bank term deposits

Unlike the previous one, the bank term deposit does have an investment purpose. It is also known as a fixed-term deposit or as a fixed-term deposit. The operation is what we have explained at the beginning of this article: The client delivers an amount of money to the bank and recovers it after a certain period of time that had been previously agreed, together with the agreed interest.

Basically it is a kind of loan that the person makes to the bank. In return, it ultimately charges an interest that had been previously agreed upon. Therefore, bank term deposits always have a maturity date. After that date, the customer can freely dispose of his money.

In the event that the person needs the money before the agreed date, will be obliged to pay a commission or penalty for cancel deposit In advance. However, there are some that do not charge any penalty. This must always be looked at carefully in the contract.

Today, the profitability of this type of deposit is quite low, at least in Spain. However, we can easily and safely access European deposits that do have good returns.

Bank deposits with remuneration in kind

There are also some banks that They try to attract customers by offering gifts instead of money. Gifts are usually things for all tastes, such as televisions, game consoles, kitchen machines, soccer balls, etc. These deposits also oblige the client to keep the money there for a period indicated in the contract. In the event that you want to access the money early, you will have to pay a penalty. This is usually the equivalent of the price of the gift obtained.

In this case, the profitability of the deposit is not monetary, but rather a remuneration in kind, as its name indicates. But be careful, even if we do not receive money, the gift is also taxable. Therefore, you have to pay taxes on the income statement.

Individual long-term savings account (CIALP)

Individual long-term savings accounts, also known as CIALPs, are a relatively new type of bank deposit. They were born in 2015 together with individual long-term savings insurance, or SIALP. As you can imagine, it was the banks that marketed the CIALPs and the insurance companies that marketed the SIALPs. Both are aimed at encouraging people's savings in the long term. In fact, money cannot be redeemed from those accounts for up to five years. For this reason they are also known as "Savings Plan 5".

Related article:
Are long-term deposits worth it?

This type of bank deposit has an advantage but also a disadvantage. Its strong point is that It is exempt from taxation when making the income statement when the five years have passed. However, it has an annual saving limit set at five thousand euros for each taxpayer. The insurances are individual and are in the name of a single person.

Bank deposits at variable interest

As for bank deposits at variable interest, they are a bit more complicated than the previous ones. In these cases, the client does not know the interest he is going to receive for the money he leaves in the account, as it depends on a specific index. Usually it is the Euribor. Most banks offer the saver the Euribor yield and a fixed spread. So the client is guaranteed only the differential. But even that is in danger considering that the Euribor is negative.

Why the Euribor is negative
Related article:
Why is the Euribor negative?

Structured deposits

Finally we are left with structured deposits. These are the most complex and are designed for people who have quite solid financial knowledge. Here too, your profitability may depend on the Euribor, but also on other stocks, such as a package of shares. Be that as it may, the guaranteed return is very small and depends a lot on the evolution of the assets. In addition, these deposits have very little liquidity.

structured
Related article:
What are structured deposits?

Now it's up to you to choose if you want to invest your money in a bank deposit or if you prefer to handle it yourself on the stock market.


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