A deposit is one of the most popular types of investing all over the world. The reason for this was not only the rapid development of this sector of the economy, but also the simplicity and accessibility of the method. However, not everyone understands what it is. What is the difference in concepts? What benefits do they bring?
Deposit is what?
The term refers to cash, as well as securities that are accepted for storage by financial, judicial, customs and administrative institutions of a private and state nature and returned to the owner after a certain period of time. Contributions in the form of cash payments may also serve as a deposit.
The advantage of this type of investment is accessibility and simplicity: the investor does not have to possess special knowledge and be aware of the situation in the economic market. To make a profit, you need to choose an organization, deposit funds and wait for interest accrual. Investors rely on a constant interest rate regardless of economic trends and various factors. The most attractive for investment are deposits in banks.
How is the contribution different from the deposit?
At first glance, it may seem that deposit and deposit are synonyms, however, in practice this is far from the case. In addition, bank employees use both terms when communicating with customers. Some linguists hold the view that these two concepts are equivalent: a deposit is a term used in Europe, and a contribution is in Russia. How is everything really?
The definition of the word “contribution” is given in article 36 of the Banking Law. For individuals, both terms may be used. For legal entities - only a "deposit". Let's take a closer look at what it is.
Deposit is a broader concept, since it implies the transfer of not only cash, but also any material assets. A contribution involves the transfer of money only. The two terms are conditionally identical, since the legislation does not establish clear restrictions between them. Each deposit is a deposit. But not every deposit can be a contribution.
Classification
The following types of deposits are distinguished:
- Bank deposits (deposits).
- Contributions for the provision of services by various organizations. For example, firms and legal entities can use them in mutual settlements.
- Bonds, stocks, gold, futures, other securities or items of material value.
- Entries in bank registers about customer requirements.
Dates of placement
According to the temporary placement period, bank deposits are divided into urgent and “demand deposits”. Money invested in demand deposits can be received by the client at any time at his request. Therefore, the interest rate is significantly underestimated. More profitable, but less liquid are “time” deposits. Profit directly depends on the investment period and the amount. The more these two components, the more benefits the customer receives.
Invested money cannot be withdrawn without loss of interest, it is also impossible to replenish the account, although some banks allow you to withdraw part of the funds. A deposit for a year has a rate, usually from 7 to 12%. Some banks offer customers floating rate deposits. The terms of placement have a fairly wide range - from 30 days to several years.As a rule, on the eve of the holidays, customers are offered more favorable conditions for deposits with high interest and minimum terms.
Bank deposit capitalization
Deposit capitalization is the addition of accrued interest to the invested amount. In practice, it usually occurs at the end of the deposit, however, such a period may be minimal. The deposit in such cases is capitalized monthly, and sometimes daily. But such a scheme is very disadvantageous for banks.
Deposit agreement
When transferring funds for storage between the bank and the investor, an agreement is concluded. According to him, the bank is obliged to repay the invested money, as well as pay dividends in the form of interest from them. The conditions and procedure are specified in the contract. An agreement shall be deemed invalid if it does not provide for a citizen to receive funds upon request. Interest is charged on the day after the bank receives the money and continues until the period of their return to the depositor or until they are claimed. The contract may provide for the withdrawal of interest as they are received in the account, capitalization and other conditions.
Inflation
The choice of this investment tool is not suitable for solving financial problems. Banks approve interest rates based on the general inflation rate in the country. Therefore, they are offered less than or equal to it. All funds received at the end of the term will have less purchasing power than initially invested. It is unlikely to save and save money with the help of a deposit, but it will be possible to slow down the process of “burning” capital. To get a higher income, you need to look for other methods.
A complete refusal to place money on a deposit in a bank is also a wrong move. Many investors keep part of their capital this way, because this method has minimal risks. It is important that the bank is a member deposit insurance systems, which works in our country. Then the invested money in case of bankruptcy of the organization will be returned to the investor.
Deposits in Russian banks: features
Banking practice in relation to deposits in our country has its own characteristics. Some organizations cannot store money in this way, however, they can issue bills of exchange, which in essence are deposits. It is also quite realistic to sign an agreement with the bank on the residual amount, which does not decrease on the account where interest will be charged. Any commercial financial institution, in accordance with applicable law, is obliged to transfer to the Central Bank a part of the funds on deposit. Thus, the required reserves program is being implemented.
Interest-bearing deposits are one of the priority and affordable investment methods. Along with this concept, the word “contribution” is also widely used, which is a type of deposit. However, the terms have different meanings - they should not be confused. Deposits for individuals cannot increase capital, but allow it to accumulate and to some extent save. In periods of economic stability, deposits are one of the most disadvantageous, but less risky forms of investment.
