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Investment products
What is a term deposit?
A term deposit is a savings product in which you deposit a sum of money with a bank for a specific period of time.
In other words, a term deposit is a loan that you make to the bank for certain length of time. At the end of the designated term, the bank returns your money with the interest that has accumulated according to the term and the amount deposited.
What if I withdraw my money before the maturity date?
A term deposit implies that you agree to leave your money with the bank for a specific period of time. This doesn't mean that you can't withdraw it before the maturity date, but if you do you will have to pay the penalty stipulated in the agreement.
Main features of term deposits:
- A guaranteed return: Term deposits carry a guaranteed return agreed between the customer and bank at the time of purchase.
- Fixed remuneration: Term deposits yield the same remuneration throughout the life of the product.
- Deposit Guarantee Fund: Term deposits have a double guarantee: the guarantee of the financial institution and the one provided by the Deposit Guarantee Fund.
- They have a lower risk than other savings products and are therefore suitable for more conservative investor profiles.
- They are simple products that don't require an extensive knowledge of investing. They are very fast and easy to purchase.
- The conditions of a term deposit cannot be changed: as a product with a specific duration, banks cannot make any changes to the conditions agreed at the time of purchase.
What taxes are payable on term deposits?
Term deposits must be declared on your annual tax return as capital gains but only for the profit obtained, not the initial amount deposited.
There are three scales for the taxation of deposits depending on the amount:
- 19% – Up to €6,000
- 21% – €6,000 to €50,000
- 23% – Over €50,000
Term deposits are an attractive product if you have some spare money but don't want to take any risks with your savings, and as long as you are clear that you won't need to access that money for the agreed period of time.