Saving is essential, but are you making the right choices? Term deposits remain one of the safest ways to save, ideal for those who want to preserve capital while earning some return. However, many investors are not aware that, by choosing just any deposit, they may be compromising not only returns but also the security of their money.
At Banco Finantia, we know that protecting your wealth and ensuring a fair return is essential. That is why we help identify the key factors to consider before choosing Term Deposits.
The interest rate: how much will your deposit earn?
The interest rate determines the return on your investment and is therefore one of the most important factors when choosing a Term Deposit. Here are the main types of rates to consider:
- Gross nominal annual interest rate (GNAI): Indicates the interest the bank pays before taxes;
- Net Nominal Annual Rate (NNAR): Represents the interest rate after withholding tax (IRS), giving you a more realistic view of the return you will actually receive;
- Net Effective Annual Rate (NEAR): Reflects the actual return after taxes and any applicable fees.
- Fixed vs. Variable Rates: Some deposits offer a fixed rate, meaning the same return throughout the term. Others have variable rates that may rise or fall depending on market conditions.
What is the ideal term for your Term Deposit?
Term Deposits can have durations ranging from a few months to several years:
- Short term (up to 12 months): Ideal for those who want to earn a return on their savings without compromising liquidity;
- Medium term (1 to 3 years): Offers a balance between return and flexibility;
- Long term (over 3 years): Generally offers more attractive rates, but requires a greater commitment, as the funds will be tied up for a longer period.
Types of Term Deposits: Withdrawable and Non-withdrawable
The withdrawal of Term Deposits refers to the possibility of redeeming the invested capital before the agreed maturity date. Depending on the type chosen, this flexibility may or may not be subject to restrictions:
- Withdrawable: Allow partial or full withdrawal before the maturity date, usually with a penalty on the interest related to the withdrawn capital;
- Non-withdrawable: Do not allow partial or full withdrawal before the maturity date.
Is your money protected?
Entrusting your money to a bank requires security guarantees. Not all investors are aware that banks do not offer the same level of protection. In the European Union, bank deposits are covered by the Deposit Guarantee Fund, which ensures reimbursements of up to €100,000 per depositor and per institution in the event of a bank failure.
When choosing a deposit, always check:
- Whether the bank is covered by the Deposit Guarantee Fund;
- Whether the amount you intend to invest is within the protection limit;
- The reputation and financial strength of the banking institution.
Term deposits can be an excellent option for those who want to invest without taking risks, but to maximize your return, it is essential to consider several factors: the interest rate, the term, the withdrawal conditions, and the bank’s security.
This communication was produced by Banco Finantia for information purposes only and does not constitute an investment recommendation. In preparing this communication, no investment objectives, financial situations, or specific needs of investors were considered. Accordingly, the information was not tailored to any actual or potential investor, nor were any specific circumstances of such investors taken into account.
The information disclosed is based on market conditions prevailing at the time, as well as on information obtained from recognised third-party entities, which are public sources. Banco Finantia has not independently verified the data or information provided by those entities. As the recipient of this communication is aware of this situation, Banco Finantia cannot, under any circumstances, be held liable for any errors, omissions, or inaccuracies contained in this document or arising from the use of such information. Banco Finantia accepts no responsibility for any direct or indirect losses or damages that may be incurred by those who carry out transactions based on the information provided.
Banco Finantia’s investment policy, whether acting on its own account or on behalf of its clients, is entirely independent of the content of this communication. The Banco Finantia Group may hold positions in, or trade, the securities or financial instruments referred to herein, before or after the issuance of this communication, and may also provide, or seek to provide, banking services to the issuers of such securities or financial instruments.
Banco Finantia’s competent supervisory authority is the CMVM, with which it is registered under number 109.
