Financial institutions offer many options for storing funds, among which deposits are especially popular. Their other name is deposits. And there are a huge number of options and offers, on the basis of which banks are ready to accept customers' money. One of them is the extension of the contribution. This is a situation in which, immediately after the expiration of the validity period, the funds are placed further, for a similar or any other pre-agreed period.
What is a deposit extension in a bank
Not always a financial organization is ready to extend the term. This is not very profitable for her, since it is impossible to predict when a person will come for his money, and this somewhat limits their free use.
Deposit prolongation is a process in which a deposit previously placed with a bank is extended for a certain period. Such an element must be foreseen in the contract. Otherwise, the bank does not receive the right to such actions. From the point of view of long-term storage of funds, such a financial instrument is very profitable. You can place money once and forget about it for many years, regularly receiving interest or even accumulating it further. In the end, you get a very round amount, which you can already spend at your own discretion.
Such a scheme is especially relevant when placing contributions in favor of children. By the time the child can manage his money, a decent amount will accumulate in his account. It can be used for training, home buying and in any other way. The bank is no longer in control of this moment.
Self extension
There are two different types of extension of the term of the deposit agreement. Extension in an independent mode implies the need to personally appear in the department by the end of the deposit and sign an additional agreement for a new period. On the one hand, this is not very convenient, as it requires some regular actions from the client. On the other hand, such a system makes it possible to independently monitor all the movements of your money and, if necessary, withdraw them when the need for financial resources arises.
Considering the fact that at the end of the term it is much easier to withdraw your contribution than to write an application for early termination of an already extended agreement, such a system can be very relevant. The only drawback is the need to independently track the term and come to the department. For most people, this will not be difficult to do, but for the elderly or people with disabilities, the next automatic system may be more suitable. In such a situation, not profit, but convenience of service may come first.
Automatic system
This option of prolonging the deposit is a special scheme, in which a visit by the client to the bank is not provided. The agreement may prescribe in advance that the deposit at the end of the term is re-placed for the same period on some specific conditions.
It should be borne in mind that in such a situation, a financial institution usually does everything so that the owner does not touch his money. For example, you simply will not be informed that the deadline has approached. In addition, you need to understand that at the same time with such a desire, the bank will try to minimize its costs. He can lower the interest rate or change something else, but only within the framework of an existing agreement.That is why it is very important to carefully read all the documents that are signed. If there are no such items there, then the bank is not entitled to perform such actions. In the worst case, you can always go to court.
Terms of deposit extension
This needs to be emphasized. As a rule, all the information that the client should be familiar with is prescribed in the contract. But in some cases, banks may use a slightly different system and insert links to electronic pages in documents, where, for example, tariffs will be located.
If it is immediately written that a financial institution has the right to independently change these or other conditions, there is a serious probability that they will worsen in the future. In rare cases, the opposite may occur, but this is more an exception than a rule. So, therefore, the extension of the contribution is a very dangerous element that must be constantly monitored independently. Otherwise, it may turn out that the money has long been placed according to completely different rules, and the profit of its owner is minimized.
Renouncement
The extension of the deposit is part of the deposit agreement, so all customers have the right to withdraw their money at any time. As practice shows, in most cases, this scheme is used: interest is accrued exactly for a certain term of the deposit. If the owner wants to collect his money ahead of schedule, he loses almost all of the interest. The same is true for extension. For example, if a contribution of 1000 rubles at 10% per annum lay exactly 12 months, then the client receives his 1100 rubles.
But if it is extended for a new term, and the owner takes it after six months, then he still gets 1100, and not 1150, as one might assume. It is recommended that you carefully study the contract, especially if prolongation is of interest. You need to know all the features that may arise, theoretical problems, rates and other elements that can affect potential income.
Summary
The financial instruments offered by banks to clients for the purpose of generating income have many conditions and features. On the one hand, the probability of losing your money completely tends to zero, but the profit received is usually not too great.
In addition, you need to consider many conditions that could potentially give the right to a financial institution not to pay interest for one reason or another. Only after a detailed study of all the features of the contract can you really earn at least a little. This is especially true for deposits with prolongation, which requires the owner of the money to carefully monitor all terms.