Published on : 27 December 20194 min reading time
A term account or WTP is a bank account that looks a few points like a savings account. However, they don’t work the same way. You earn interest with a savings account while you earn interest with a term account. You pay money into your savings account as often as you like. You make a single deposit when you open the term account.
The term account’s prerogative
Opening and closing the account is free of charge. And the term account does not require any management or deposit fees. Most financial institutions offer a term account. It reverses the role between the bank and the customer. In this case, it is the saver who lends money to the bank for a specific period of time. Are you looking for the best term account? You should know that the longer the term of the contract, the higher the interest rate. We can also talk about remuneration. The banks are free to set the amount and conditions of the remuneration. In addition, the remuneration obtained depends on the type of WCB you have opened. First of all, the fixed-rate WCB allows you to enjoy a fixed interest rate throughout the year, regardless of the duration of the contract. If the market rate rises, you lose out. However, if the market rate is falling, you are a winner. Then, the Step Rate WCB offers increasing compensation throughout the contract. The rate and frequency of the increase are fixed in advance in the contract. Finally, WCB Variable Rate has many positive and negative surprises in store for you. The rate applied by the bank is indexed to the market rate. The interest on the term account is calculated on a daily basis and not fortnightly like savings books.
Conditions for opening a term account
The minimum deposit depends on each bank. It can range from a few hundred to a few thousand euros. You make a single deposit when you open the account. If you want to make another deposit later, you have to open another term account. In any case, all the information about the creation of the term account is mentioned in the contract signed between the bank and the saver. This contract includes the amount of the deposit, the term, the remuneration (the interest rate and the payment date), the conditions for renewal at the maturity of the WTP and the amount of penalties in case of early withdrawal.
Warning on opening a term account
Before opening a term account, you should know all the rules and regulations that govern it. Note that the remuneration you receive is classified as income from movable property. Therefore, it is subject to the single flat-rate withholding tax with an overall rate of 30%. This includes 12.8% income tax and 17.2% social security contributions. Then, study the stakes of your investment before you start. The sums are frozen for the duration of the period agreed by both parties. If you wish to unblock the sum before the term, you will be subject to a penalty. In case of withdrawal from the first month, the remuneration is cancelled. Beyond this period, other penalties may apply, such as a reduction in the interest rate or the charging of a flat-rate termination fee. In any case, a minimum notice period of 30 days must be observed. In order to avoid being penalised for a large sum, you are advised to open several term accounts instead of just one. Thus, the penalty will only apply to the account withdrawn before the due date.
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