Investing doesn't have to be complicated! One of the most suitable options for those seeking a safe and low-risk investment is a time deposit.
A time deposit is similar to your regular savings account but with a "leveled-up" feature — higher interest rates. Curious about deposits? Let's dive into everything you need to know, from the basics and types to their benefits and tips for choosing the right one. Let’s get started!
What Is a Time Deposit?
A time deposit is a bank savings account where the funds are locked for a specific period and can only be withdrawn after maturity. Unlike regular savings, you can’t withdraw your money anytime. But in exchange, you get significantly higher interest rates.
For instance, with Nobu Daily Savings, you can earn up to 5% interest annually, paid daily. Meanwhile, Nobu Deposito offers up to 6.25% annual interest, but it’s only paid after the deposit matures.
This makes time deposits perfect for those looking to keep their money safe while earning returns. Additionally, many deposits come with a feature called Automatic Roll Over (ARO), which automatically renews your deposit upon maturity—no extra hassle!
Types of Time Deposits
Time deposits come in various forms, each with unique features and benefits. Here are three common types available in Indonesia:
- Fixed Deposits
This is the most popular type of time deposit. Fixed deposits are held for specific terms, such as 1, 3, 6, 12, or 24 months. Withdrawals can only be made after the term ends, unless you’re willing to pay a penalty. These deposits are issued in the name of an individual or institution, meaning only the holder can withdraw them. One advantage is the flexibility in interest payment, which can be credited to your account or paid in cash. - Certificate of Deposit (CD)
A certificate of deposit is similar to a fixed deposit but isn’t tied to a specific account holder. This means it can be transferred or sold to another party. CD terms range from 1 to 12 months, and the interest can be paid upfront, monthly, or at maturity.This type is ideal for those who want the flexibility to transfer ownership of the deposit. - On-Call Deposits
On-call deposits have short-term durations, typically ranging from 7 days to less than 1 month. They’re designed for those with large funds who need flexibility in withdrawal timing. Interest rates are generally lower than fixed deposits but higher than regular savings accounts. Interest rates are often negotiable between the customer and the bank.
Benefits of Time Deposits
Time deposits offer several advantages that make them an attractive investment option, especially for individuals prioritizing security and stability.
Here are some key benefits:
- Competitive Interest Rates
Time deposits provide higher interest rates compared to regular savings accounts, making them ideal for protecting your money from inflation. - Guaranteed Safety
Funds in time deposits are insured by the Indonesia Deposit Insurance Corporation (LPS) up to IDR 2 billion per customer per bank, as long as the interest rate doesn’t exceed the insured limit. This makes deposits one of the safest investment options. - Collateral for Loans
Time deposits can be used as collateral for bank loans, offering flexibility for customers who need funds without breaking their deposit. - Structured Financial Planning
With fixed terms, time deposits help you manage your finances more effectively by locking in funds and reducing the temptation to spend. - Automatic Roll Over (ARO)
Many banks offer an ARO feature, which allows your deposit to renew automatically, ensuring your funds continue to earn interest without requiring manual intervention.
Things to Consider When Choosing a Time Deposit
Although time deposits are beneficial, there are a few things to watch out for to avoid potential losses:
- Ownership Documents
Ensure you receive official proof of ownership, such as a deposit certificate or receipt, after opening your deposit. This document is essential for withdrawal later. - Interest Rates Under LPS Limits
Verify that the bank's interest rate is within the limits insured by LPS. If the rate exceeds this limit, your funds won’t be covered in case the bank fails. - Early Withdrawal Penalties
Withdrawing your deposit before maturity usually incurs penalties, such as reduced interest or additional fees. Plan your finances carefully before selecting a term. - Tax on Interest
Interest earned on deposits is subject to a 20% tax for certain amounts. Be aware of this rule to avoid surprises when receiving your payout.
Tips for Choosing a Time Deposit
To maximize the benefits of time deposits, it’s essential to choose the right bank and product. Here are some tips:
- Choose a Reputable Bank
Opt for banks with strong reputations that are supervised by the Financial Services Authority (OJK). A financially healthy bank provides more security for your funds. - Check Interest Rates Against LPS Limits
Select banks offering competitive rates that fall within LPS’s guaranteed limits to ensure your money stays protected. - Match Terms to Your Needs
Pick a term that aligns with your financial needs. For more flexibility, consider on-call deposits. For long-term investments, fixed deposits are more suitable. - Leverage ARO Features
If you don’t plan to withdraw your deposit soon, opt for a product with an ARO feature to keep earning interest seamlessly. - Compare Bank Offers
Before opening a deposit, compare interest rates, penalty policies, and other services from different banks. Choose the one that best fits your goals.
How to Open a Time Deposit
Opening a time deposit account is simple and increasingly convenient with digital banking.
Here’s how:
- Select a Bank and Product
Choose a bank based on its reputation, interest rates, and services. Ensure it’s registered and supervised by OJK. - Prepare the Required Documents
Gather documents such as your ID, Taxpayer Identification Number (NPWP), and an existing bank account with the chosen bank. - Set the Term and Amount
Decide on a deposit term, such as 1, 3, 6, or 12 months, and specify the amount to be deposited, meeting the bank’s minimum requirement. - Deposit the Funds
Transfer or deposit the funds into your new time deposit account. Keep the transaction receipt as proof of payment. - Get Proof of Ownership
Once your funds are deposited, the bank will provide a deposit certificate or receipt. Store this securely for future withdrawals. - Understand Terms and Conditions
Read the terms carefully, including the interest rate, early withdrawal penalties, and features like ARO. Ask questions if anything is unclear.
Many banks now offer digital deposit services through their apps, making the process even more convenient. For example, Nobu Deposito can be opened online with just a few taps through the Nobu Go app. They offer competitive rates of up to 6.25% annually and flexible terms ranging from 1 to 12 months. Nobu Deposits also feature ARO and are perfect for managing your finances efficiently while maximizing returns.
With the right strategy and understanding, time deposits can be a valuable tool for securing your finances and earning steady returns. Ready to start investing?
