The simple idea that money should work, and not just lie at home with a dead weight under a pillow or mattress, and bring income to its owner, visited by many bright minds. The result of these thoughts is usually the decision to open a contribution. Then the ordeal begins in search of a suitable lending institution.
Today, financial systems know many objects for investment - real estate, business, precious metals, securities. Naturally, investments are fraught with risks, but by learning to correctly assess them, one can achieve quite real successes in this field. Consider what is the capitalization of interest on the deposit account.
Interest capitalization - what is it?
Capitalization in this case is a type of settlements and charges on the amount that is on deposit. To be precise, these are accruals made not at the end of the term on the amount that was originally, but over the entire period of the deposit on certain conditions. For example, this may occur once every quarter during the year. At each charge, the percentage is considered not from the original amount, but from the amount that is currently in the account. Amount over time will grow rapidly (or not very, depending on your choice). Is a monthly capitalization profitable?
Monthly interest deposits
In most cases, if you choose investments with the terms of monthly crediting to the account, but with a lower percentage, you can win financially more than in the case of accrual once a year, but at higher bank rates. Saving money on a deposit is one of the most popular opportunities to increase a deposit. Money in this case is partially insured against inflation, and for security reasons this option is certainly reliable.
The type and number of deposits are diverse, as are the number of banks offering these services. You need to choose the one that is right for you in terms of time, purpose and interest rate. One of the most important characteristics of bank deposits is the time frame in which the client can receive income. Consider the positive and negative sides of the capitalization of interest on the deposit account.
Advantages and disadvantages
The advantages of such a placement of funds would seem to be quite obvious. The above example proves this. However, like many other financial instruments, this option is not without drawbacks.
In this case, the disadvantages include the fact that credits are withdrawn only in a certain period specified in the contract, otherwise interest on the deposit is lost. But this point is not confusing for every investor (after all, everyone has their own circumstances). In case of early withdrawal of the invested amounts in full, the investor receives a completely different income.
Compound interest is not always more advantageous than the standard method of calculating the deposit rate, since this rate is usually not very high, so it is not always worth choosing in favor of a deposit with complex calculations. It is better, having analyzed all the proposed options, stop choosing the most profitable in terms of profitability. What is the capitalization of interest on the deposit account?
Kinds
Of course, in the case of bank deposits, compound interest works for the depositor, with the correct calculation and understanding of the conditions, of course. But sometimes such a factor as capitalization does not work in a completely positive way. For example, in the case of loans.Everywhere we come across a situation where a person takes a completely non-astronomical amount, but pays it for a rather long period of time. During the period, it would be possible to repay the entire debt long ago, however, sometimes it turns out that only part of the loan has been paid. This is where the very compound interest appears. In these situations, the calculation is as follows: with each month the initial amount grows in accordance with its own percentage, determined by the agreement.
How does the interest on the account capitalize?
This means that the calculation of the overpayment is set from the amount with interest already accrued. You can understand that this is far from the most profitable lending option, since it is initially assumed that it is possible to overpay less by paying off debt more quickly. Nobody thinks about capitalization at the moment of choosing a loan, and the disadvantage of conditions is not always obvious.
There is such a type of capitalization as market. In this case, they analyze money growth as an indicator of the effectiveness of a particular sector of the economy, field of activity or an individual enterprise. If, for example, you select a specific organization, then, having studied its accounting report, you can trace the movement of working capital of a given company in that direction. In order to get a complete picture, you need to take into account only the capital that belongs to the organization itself, excluding all borrowed funds from the calculations. Market capitalization does not correlate with deposits at all, it rather allows you to see the general development trends of this process.
What to look for when choosing?
First of all, you need to study the information about the bank itself, and, despite all the advantages offered, try to objectively evaluate the pros and cons. Regardless of the proliferation of the proposed income, the safety of money is the first choice. For example, such an obvious fact, the more unrealistic and more beneficial the deposit interest is for the depositor, the more the bank needs your funds, the less money it has. This is usually a direct path to bankruptcy.
How to choose the right deposit with replenishment and capitalization?
Of course, small deposits almost always come under insurance. Nevertheless, it is better to deal only with trusted credit institutions. The choice must be made according to several criteria: customer reviews, the bank's life, reputation. The second main point (when choosing the capitalization of the deposit) is how quickly this money can be needed and whether the client will need it in the near future. If the answer to this question is yes, then it is obvious that short-term investments should be considered.
Do not dwell on the first offer that comes across, because in our country, and quite successfully, there are many large banks and other financial institutions that offer profitable, competitive banking products. It is worth comparing not only different institutions, but also different types of deposits, since many of them have some unique conditions for clients.
What is interest capitalization on account 08? Let's figure it out.
In accounting, the interest accrued on the loan must be credited to the debit of account 08. But only if the loan is taken in order to create an investment asset, interest is included in its initial cost.
Deposit periods
All periods in which the bank accrues interest, the bank itself selects and offers. The depositor agrees with them or rejects the conditions offered to him. Distinguish between such enrollment options:
- One-time. It is very unprofitable, since crediting occurs once, at the end of the period.
- Annual. Low profitability with a short period of time, although with a longer period of five years may be a perfectly acceptable solution.
- Quarterly.A more profitable and convenient option for those who are interested in short-term deposits, since interest “drops” every quarter.
- Monthly. Most suitable for a short-term investment on a deposit, since interest is accrued every month.
- Daily. A rarity among banking products, as the bank is completely disadvantageous.
Capitalization in Sberbank
The capitalization of interest on a deposit account in Sberbank is popular. There you can choose the most suitable contribution from the product line, for example, "Replenish", Save "," Manage ". For each such contribution, capitalization is available. That is, the accrued interest will be added to the total amount, and in subsequent periods the interest will be more profitable.
Conclusion
From all that has been said above, it can be concluded that such a phenomenon as the capitalization of interest on a deposit account still has more positive than negative. This type of deposits is designed for people who are interested in income stability, as well as those who want to receive the maximum possible profit in the shortest possible time.