Banks remain as the most popular financial institution for saving money despite the host of other options available for consumers. While it is true that bank deposits only earn so little, usually less than 1%, there are options that offer higher rates.
To grow your money, it is better to choose time deposit instead of a regular savings account. Take note, however, that the time deposit needs to be in the bank for a certain period of time before it can actually earn interest.
Best Banks for Time Deposit
As expected, different banks offer different interest rates on their products, including time deposits. The following are some of the best banks for time deposit in the Philippines, ranked from highest to lowest in terms of interest rates:
- City Savings; 3.50%
- Security Bank; 2.30%
- RCBC; 2.125%
- PSBank; 2.00%
- Chinabank; 1.450%
- Metrobank; 1.25%
- Unionbank; 0.750%
- PBCOM; 0.625%
- EastWest Bank; 0.60%
- BPI Direct Savings Bank; 0.50%
- UCPB; 0.50%
- BDO; 0.50%
- BPI / BPI Family Savings Bank; 0.25%
Factors that Affect Time Deposit Rates
Aside from having different interest rates, these banks also have different terms, minimum deposits, and various rules governing their time deposit products. The following are factors that affect time deposit rates:
Terms or Length of Investment
The time deposit rates will vary, depending on the term or length of investment that you pick. There are banks that allow for a 30-day term while others require at least 6 months. All banks offer deposit terms for 1 year while there are also many that accept much longer terms.
As expected, shorter terms mean a lower interest rate. If you want to get the interest rate from the bank, then you should pick the longest term of placement.
For example, a deposit of Php10 million will only earn an interest rate of 1.25% at City Savings Bank for a 30-day term but the same amount can get as high as 3.50% interest rate if placed for 5 years and 1 day.
Amount of Deposit
Aside from the term you pick for the time deposit, the amount of money you deposit in this special account will also determine the interest rate. At CitySavings Bank, the one with the highest interest rate on this list, a deposit of Php50,000 will only earn 0.80% for the minimum 30-day placement but for the same term, an interest rate of 1.25% is offered if you deposit Php10 million or above.
Type of Interest Chosen
There are two basic ways that banks calculate interest rates: simple interest and compound interest. For simple interest, only the principal amount earns interest. Whether you withdraw the interest you earn or not, the computation remains the same.
That’s why compound interest is a better option because your money will grow quicker in this manner. Not only will the principal amount earn interest, but the interest you earn will also gain interest as you continue to save your money.
Often, banks let you choose to earn compound interest on your time deposit; though this will still depend on the term you picked.
Additional Things to Know about Time Deposit
Take note of the following before you put your money on time deposit:
Withdrawal Not Allowed
Although it is easy to open a time deposit account, you can just withdraw the money anytime you want. You have to wait until the maturity date before you can withdraw the money. If you insist on taking the money before the maturity date, you might incur some penalties and get a lesser amount than what you deposited.
Although the longer terms mean higher interest rates, it might also be a good idea to pick shorter terms if you think you will need the money in the near future.
Additional Deposits Not Allowed
You can’t also make additional deposits until the term is over.
Tax Charges
Just like other bank deposit and investment products, you still have to pay taxes on your time deposit. This will follow the standard 20% withholding tax.
Limited Insurance by PDIC
Take note that the PDIC only insures deposits up to Php500,000.
There are many things to consider in choosing the best bank for making a time deposit in the Philippines. Make sure to research well, study your options, and compare these banks before making the final decision on where you will save your money, how much you are going to save, and how long the term will be.
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