My experience in Time Deposit Investment
Usually we put our extra cash or savings in the bank, thinking that at least it will earned an interest. I'm sure most of us put it in a regular saving account, like what I did before I tried the Time Deposit.
Regular Saving Account usually bear 0.50% interest rate per annum (It may varies depending on the interest rate of the bank) and there is no restriction on number and amount of withdrawal as long as it has a sufficient fund. The things that we should know about the regular saving account is that; this kind of account has maintaining balance set by the bank , failure to comply with this we have to pay the penalty charge every month; and before our money earned an interest we should meet first the required maintaining balance set by the bank.
Time Deposit giving a much higher interest rate compared to regular saving account, it depends on how much money you will invest and for how long you will kept it in the bank. The other things we should know about this type of account is that; we cannot just withdraw the money anytime we want to, we have to wait until it reach the maturity date, if you really need or wish to get back your money before it reach the maturity date, the bank will give it back to you but they will charge you some penalties for not following the agreed time.
Last August 1, 2011 I have Php11,000.00 cash, I was thinking where should I invest it. Then, it came to my mind the Time Deposit. So, I decided to put my money on it for 35 days at 2.25% per annum at BPI direct Saving Bank thru online banking.
If you want to know how much will be the interest of the Php11,000.00 after 35 days then let us compute.
Note : I = Interest, P= Principal, r = Interest Rate, t = Time
Now that we have the gross interest, our next step is to determine the 20% Income Tax that being withheld by the bank. It is very easy to do, just determine the gross interest and multiply it by 20% the result will be your Income Tax (24.06 x 20% = 4.81). To know how much the Net Interest Income you earned, we just simply deduct the Income tax from the gross Interest Income (24.06-4.81 = 19.25).
On September 5, 2011, After 35 days I got back the money with interest amounting of Php11,019.25.
Are you interested to know, how much the interest that I will earn? If I just left it in a Regular Saving Account for the same period of time. Let us compute, applying the same formula the only difference is we have to change the Interest rate and this time it would be 0.50% per annum.
Note: In giving interest on a regular savings account, banks don't do it in per day basis. Usually they do it quarterly, but there are some banks that giving interest is on a monthly basis. I just do it, to show the difference between Time Deposit and Regular Savings Account in terms of interest.
I'm hoping that by sharing my experience in investing on Time Deposit, I was able to give you some idea on how it works.
So, guys if you have some savings or extra cash that sleeping in your regular saving account, why don't you try to invest it in Time Deposit account or start learning about Stock Market.
Note: Time Deposit Account is covered by PDIC (Philippine Deposit Insurance Corporation) up to Php500,000.00. Just make it sure that your bank is a member of PDIC.
Please feel free to leave any criticism, comments, suggestions and questions.
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