A fixed-term deposit , commonly called a fixed term , is one that does not allow the money to be withdrawn until a certain time has elapsed . In this way, the resources are immobilized in the bank for the stipulated period without their owner being able to use them, although generating interest from them.
The term in question is made up of two words, of which it is interesting to know their etymological origin. Term, first of all, comes from the Latin “placitum”, which is synonymous with “adjusted” or “agreed”. Fixed, secondly, also emanates from Latin, in its case “fixus”, which can be translated as “nailed” or “fixed”.
Due to these interests, the fixed term is an investment . It is a financial operation that a person carries out to obtain, within the expected period, more money than they deposited.
Financial specialists usually classify fixed terms as low-risk investments and that is why they recommend this instrument to investors with a conservative profile . Whoever makes a fixed term already knows precisely, at the time of confirming the operation , how much he will earn and on what date.
In addition to the benefits outlined above, if many people decide to invest in fixed-term deposits, it is also because of other advantages they offer, such as these:
-They provide an interesting profitability. Specifically, it is determined that the longer the performance time, the greater the profitability.
-In the same way, it has been established that the hiring process for those mentioned is really simple and fast.
-Within the set of investment elements that exist in the market, they are some of the safest that exist.
However, fixed-term deposits also have a series of disadvantages, which are what make some people reject investing in them. Thus, for example, we can highlight that among its most significant disadvantages are the following:
-The main drawback is that once a fixed-term deposit is contracted, the money that has been invested in it cannot be used again within the established time.
-In the same way, you must know that if, due to certain circumstances, you need to proceed to use that money and you need to withdraw it, you will have to pay a commission. And this precisely will not be very economical.
Suppose a bank offers a 20% interest rate for 30-day fixed deposits. This means that if a client specifies a fixed term of 1,000 pesos for 30 days , when that term is met he will receive 1,200 pesos : the 1,000 pesos of the initial capital plus the 200 pesos that correspond to interest .
Until a few years ago, fixed installments had to be made at bank branches . The person handed over the money and received a printed document as a certificate, which also served as a security to be negotiated.
Currently, however, fixed installments are usually made through electronic banking . By entering their home banking , the subject can choose the amount and term of their investment: the money is debited from their bank account and then that capital and the interest generated are credited to the same account.