The unpredictability of the economic and political situation in Russia has led many people in our country to be skeptical of keeping their savings in bank accounts. However, practice shows that the degree of distrust in this type of service is already starting to decline - the situation with the placement of private funds in the form of deposits is improving from year to year.
A significant part of Russians seeks not only to maintain their hard-earned income, but also to ensure its stable growth. What is deposit capitalization? Not every potential investor knows that this banking tool is able to help him in solving such an urgent task as the preservation and increase of personal savings. Let's try to clarify the situation.
The main meaning of the term
The concept of “capitalization of the contribution” has already firmly entered the everyday life of our compatriots. Under this term is the process of accruing interest income to the initial deposit amount (body of the deposit). The calculation is made according to the compound interest formula.
As a result of a special banking procedure carried out by the employee responsible for deposit operations, the accrued amount is added to the deposit funds available on the deposit account. Further calculation of income will be made taking into account the amount of interest calculated on the deposit for the previous period.
Is deposit capitalization beneficial for clients?
Most likely, they will never succeed in obtaining a unified and correct opinion on this score. To make a conclusion about the attractiveness of a particular deposit program is possible only after careful clarification of all the nuances.
Calculation of deposits with capitalization is carried out in accordance with the conditions specified in the contract. Most often, interest is accrued and accrued monthly or quarterly. The amount of income received directly depends on the established interest rate and the length of the term for placing funds in the deposit.
As a result of the analysis, it turns out that the aggregate income received by the depositor for providing his personal savings to the bank, with interest capitalization, will be significantly higher than under similar programs without adding funds. However, this effect is often reduced to zero. The fact is that interest rates on certain types of term deposits that do not provide for capitalization noticeably overtake income from allocated resources with the possibility of adding interest to the main amount of savings.
That is why it is worth approaching responsibly in choosing a deposit and signing a bank agreement. It is often revealed that an ordinary deposit placed for a certain period is more profitable than a deposit with interest capitalization issued for the same period.
The result of the calculations
There are many banking institutions where the capitalization of the deposit is provided. Sberbank of Russia also offers interest-bearing deposits to its depositors.
Suppose that a deposit of 30,00 rubles is made out for 730 days (2 years). In the event that the deposit agreement contains an indication of the capitalization of interest income, the deposit growth over the entire term will amount to 7125 rubles at a rate of 10.5% per annum. If you place the same amount on other conditions (a deposit with interest at the end of the term at 12% per annum), then the interest income for the entire period will be 7200 rubles. The difference is not too noticeable if the size of the deposit is small. But on large amounts of deposits, you can lose a significant share of income.
In which case the interest calculation will bring the maximum income?
Due to the fact that the increase in the amount of interest is carried out with a certain periodicity (usually monthly), in each subsequent period the income is accrued for the increased deposit amount. Therefore, it should be remembered: the longer the deposit is placed, the higher will be the client’s income from providing his personal monetary resources to the bank. Capitalization of the deposit will be most beneficial for individuals who have opened a deposit lasting 365 days or more.
What should future investors know about?
In some agreements there is a clause stating that after the expiration of the specified period for the deposit, it is possible to prolong it if the client does not take the money. You should carefully study all the details of the program, since the extension of the deposit may be disadvantageous for the client. The prolongation of the deposit is most often carried out on those conditions that are currently in force. Therefore, the depositor may lose a substantial part of the income if he does not draw up a new deposit agreement on more attractive terms.
Thus, the capitalization of the deposit may come as a pleasant surprise for those who managed to choose from all the offers the banking program that has the most suitable conditions for the allocation of cash resources. A deposit issued for an optimal term will allow you to secure and significantly increase the accumulated personal capital!
