Polls / April 21, 2010

Do you know the difference between an on-call account and a fixed-term deposit?

Do you know the difference between an on-call account and a fixed-term deposit?

Just 39% of respondents to our eZonomics online poll know the difference between fixed-term and on-call deposits, while 61% are not so sure.

Fixed-term or time deposits?
The names can vary by country Fixed-term and on-call deposits are known by a variety of terms, so this poll could have asked if respondents knew the difference, for example, between "time deposits" and "call accounts". No matter what terminology is used, the savings tools have fairly consistent differences and it can be helpful to have a mix of both types to suit personal finance needs.

Fixed-term deposits are locked in for a period of time and can attract higher interest Fixed-term deposits require investors to keep their money in the account for a set period of time. The time period - or term, as it is known - can be as short as 90 days or as long as several years. Fixed-term deposits often earn competitive interest as an incentive for savers to lock in money. The interest rate typically does not change over the agreed period and penalties usually apply if money is withdrawn before the end of the term.

Fixed-term deposits can be useful for those putting aside money for known future expenses, such as a holiday or college fees. But fixed-term deposits are not such a good way to store money that will be needed quickly and at unpredictable times, such as emergency funds. On-call deposits can be withdrawn at short notice On-call deposits, on the other hand, can be accessed at very short notice - often immediately.

The accounts tend to offer lower interest on savings than fixed-term deposits. The nature of on-call accounts mean they work well for paying day-to-day expenses and they are useful for saving money that may need to be called on at short notice, such as emergency funds. No matter which you use, be sure your money is safe When putting money into a financial institution, ensure you are confident it will be paid back.

During the global financial crisis, some financial institutions offered much higher rates if savers would lock in their money for six months or a year. But some of these institutions were financially unsound and subsequently collapsed. Check if guarantees are offered for deposits by a government or the financial supervisor for the institution involved. eZonomics runs an online poll daily and publishes an analysis of the results the next working day. 

Spending

eZonomics team
.(JavaScript must be enabled to view this email address)