Deposits: Definition, Types and Benefits

Deposits are one type of savings offered by banks.

In contrast to savings, customers who save their money in deposits can only withdraw money within certain time periods and conditions.

You can find out complete information about deposits in the following review.

What is a Deposit?

As mentioned previously, deposits are one of the investment instruments issued by banks. According to the Financial Services Authority (OJK), deposits are a type of savings whose disbursement can only be made within a certain period of time and under certain conditions.

Even though funds can only be disbursed on the maturity date according to the initial agreement, this investment instrument offers returns in the form of higher interest rates than ordinary savings, you know.

Apart from that, this investment instrument is also considered safe and reliable because customers can get a guarantee that there will be no reduction in investment value with relatively fixed interest.

Types of Deposits

Before opening a deposit account, it’s a good idea to first understand the type of deposit required.

1. Term Deposits

This type of deposit is the type most often chosen by customers.

Time deposits are a type of deposit that allows customers to save their funds to obtain interest rates within a certain period of time as agreed with the bank.

There are several time deposit savings period options, ranging from 1, 2, 3, 4, 5, 12, 18, to 24 months. This time period will influence when customers can withdraw funds. For example, if a customer chooses a term deposit with a term of 3 months, the funds he has saved can only be withdrawn 3 months after depositing the funds.

2. On-Call Deposits

This type of deposit is a relatively short term savings, namely with a period of one week or a maximum of one month.

Usually, to be able to save in on-call deposits, customers have to deposit quite large amounts of funds. Interest can also be disbursed on the due date provided that the customer must notify in advance that the savings will be disbursed.

3. Certificate of Deposit

Finally, a deposit certificate is a form of savings that is issued for a period of 1, 3, 6, up to 12 months and can be traded to other parties accompanied by a certificate.

In this type, interest payments can be made in advance, every month, or at maturity.

Deposit Benefits

1. Can be used as credit collateral

Apart from having low risk, deposit investment instruments are investment products that can serve as collateral for customers to apply for loans or credit.

This is also what differentiates deposits from ordinary savings at the bank.

2. Higher Interest Rates

Customers who save money in deposits will get higher interest rates than saving their money in regular savings.

Generally, deposits offer interest 3 times the interest on regular savings. Of course, this also depends on the storage period you choose. Apart from that, the bigger your investment fund allocation, the bigger the profit you will get.

3. Guaranteed by the Deposit Insurance Corporation (LPS)

There is no need to worry about investing in deposits because this investment instrument is under the supervision of the Deposit Insurance Corporation (LPS).

LPS functions to guarantee customer funds at the bank and guarantee investment funds of up to IDR 2 billion per customer at each bank. That is why this investment instrument is considered safe.

4. Easy Investment

Apart from being a safe investment alternative, deposits also offer ease of use.

Customers only need to prepare an account according to bank regulations, allocate a certain minimum amount of funds, select a maturity date, and that’s it. It’s easy, right?

5. Small Risk of Loss

Finally, for those of you who prefer investments with low risk, deposits could be an option.

This is because the minimum deposit amount set by the bank is usually not too large.

Apart from that, this investment product also guarantees that there will be no reduction in principal value so this instrument tends to have lower risk.

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