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Banks make money by lending loans out of the money we deposit with them. In case of a regular savings account, you can withdraw your money anytime you want. So the bank cannot effectively use this money to make profits themselves. But, in case of a Certificate of Deposit the bank knows that you will not withdraw the money until the stipulated deposit period, so they can effectively utilize this money to make a profit and therefore share a percentage of the same by means of a higher interest rate.

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14y ago

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Do many banks pay interest on the money you deposit into your savings account?

Yes, many banks pay interest on the money you deposit into your savings account.


What happens to the money that you deposit in a savings account at a bank?

When you deposit money in a savings account at a bank, the bank uses that money to make loans to other customers and earn interest. In return, the bank pays you interest on the money you have deposited in your savings account.


Is a savings account a time deposit?

No, a savings account is not a time deposit. A savings account typically allows for unlimited deposits and withdrawals, while a time deposit requires the funds to be held for a fixed period of time in exchange for a higher interest rate.


What is the purpose of a business deposit account?

Business deposit accounts are also known as business savings account where one can deposit an amount of money as savings for one's business. Most savings accounts will also offer interest rates.


What is a savings or deposit account?

It is a bank account where a person will make regular, monthly savings to build up capital. The savings or deposit account will not normally come with a card or cheque book and the savings in it will attract a higher rate of interest than a normal bank account. However you lose this high rate of interest if you withdraw your money suddenly or before a certain period,


What is a certificate of deposit?

When you put money in a savings account, you can draw it out at any time. In a certificate of deposit, you agree to leave it in the bank for a certain period of time. They pay slightly higher interest because they know that money will be there for 3 months, 6 months, 1 year, etc. If you draw it out early, they reduce your interest.


What is meant in by term deposits in banking?

The meaning of a Term Deposit in banking is referring to a savings account or a certificate of deposit. This particular savings account or certificate of deposit pays at a fixed rate of interest until given a maturity date.


What is the purpose of a savings?

A Savings Account is a type of account that is designed to promote savings among the general public. You can deposit and withdraw money from this account but at the same time the bank offers you an interest on the money deposited into the account.


What is the difference between a savings account and a certificate of deposit?

In a regular savings account, the funds are always available for withdrawl. As a result, savings accounts generally have a low rate of interest. A certificate of deposit is an investment for a specific amount of time. The funds are not available until the certificate has matured, therefore, it has a slightly higher rate of interest than a savings account.


Which is a type of savings account that is designed to accrue interest for a specific period of time?

certificate of deposit


Which of these is a type of savings account that is designed to accrue interest for a specific period of time?

certificate of deposit


What the the advantages and disadvantages of a certificate of deposit?

Certificates of deposit are a good idea because they are a high interest deposit and offer a higher interest rate than a savings account and treasury bills and notes.