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What is a term account?

The term account is a savings account that allows you to benefit from a very interesting and attractive interest rate. Be careful, however, it is only possible to take advantage of it under certain conditions and that is precisely what characterizes it. So what is it exactly? How does a term account work? What is his remuneration? Answers!

What is the term account?

The term account is a savings bank account on which you can benefit from a very attractive interest rate. In return, the sums deposited are blocked for a period which can range from a few months to several years, so it is the contract that frames the agreement between the bank and the customer that will govern the details of this agreement. What is more, the interest that one will benefit from on his term account is subject to income tax and social security contributions (all you need to know about the term account).

The rules of the term account are governed by contractual freedom or the agreement concluded with his bank. There are therefore a multitude of possibilities with a term account at a fixed rate (guaranteed for the entire duration of the account), at a progressive rate (which increases over time, hence the interest of keeping your account as long as possible. ), at a variable rate (indexed to a market rate or a benchmark index, it can therefore go up or down), the opening of several CATs with different commitments or the opening of a CAT with other savings products.

How to open a CAT?

The opening of a CAT is done like any other savings contract. This means that you must first of all take note of the offers offered by a banking establishment to choose the one that best meets your expectations and sign a contract to seal the agreement. The bank obviously has the obligation to explain to its client how the CAT works before signing the contract and in the case of a variable rate term account, it will provide him with dedicated information documents.

In the contract, we will find basic information such as the minimum and maximum deposit amount, the duration of the contract, the interest rate with its method of calculation and its payment date, the penalties in the event of withdrawal before maturity and the conditions for renewing the contract.

A single payment can then be made to the account without the possibility of adding an additional sum thereafter. The entire capital of the account is therefore paid from the outset. The contract can be concluded for a fixed term or renewable. It is possible to withdraw funds or a part before the end of the period provided, but penalties apply.

Why open a term account?

As the term account is fixed and blocked for a certain period, it is not intended for all audiences, but can meet many needs. It is for example an interesting alternative to the booklet, the rate of which will often be lower than that found with a CAT. However, it requires having your capital to save from the start. This can be an interesting way of not letting your money “sleep” while waiting to materialize a specific project such as a real estate purchase or any other major investment for example. You can also choose the CAT to put money aside for a loved one such as their children, for example, the end of the waiting period will then correspond to their majority for example.

Source: Magazine Assurance

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