A fixed deposit account is an account that allows individuals earn higher interest rates than keeping money in a savings account. In a fixed account, the individual fixes a date to withdraw the money.
The interest rate for this kind of account is usually high if the money is not withdrawn before the fixed date.
Why do banks pay high for fixed deposit accounts?
Banks are always looking for ways to make more profits; they need to pay shareholders, salaries, maintain the bank structure and still have profits.
When you open a fixed deposit account, you are giving the bank a time frame to use your money for businesses that will fetch more income until the given maturity date.
The bank can loan your money to other customers that need loans and charge them high-interest rates. They could also use your money to invest in other investments in their portfolio.
Hence, they pay you higher interest than a savings account. If you withdraw the money before the maturity date but the accrued interest would be forfeited.
Benefits of a Fixed Deposit Account
- It earns higher interest rates than other account types.
- It encourages a saving culture.
- You get to choose how long you want to invest your money.
- You can have more than one fixed deposit account.
- The returns of your investments are assured.
- The minimum amount for opening a fixed account in most Nigerian banks is ₦100,000 and the minimum time frame is 30 days.
How to Open a Fixed Account
Visit the bank you want to open a fixed account with. Collect the fixed deposit account form and submit.
Each bank has different interest rates. You can contact the bank and enquire about their interest before opening the fixed account.
Please note that; the banks may require you to own a saving or current account with them before you apply for a fixed account.