What is a Deposit? Types, Benefits and Risks

Deposits are one of the investments that banks offer, and are in the form of savings. Deposits are also money held in a bank account or at another financial institution, which requires a transfer from one party to another. 

Deposits can be in the form of a sum of money used as collateral or collateral for the delivery of goods or services. 

Are you interested in investing with a deposit? There are different deposit types, and other things you need to pay attention to, before you make an investment. Therefore, read this article to the end, OK!

Deposit definition

In finance, a deposit is the act of placing money or other valuable assets into an account with a bank, financial institution, or other similar organization.

Deposits can be made in various forms, such as cash, check, or electronic transfer, and are usually made by an individual or a business.

You can take the money you deposited at the bank at any time, to anyone, or you can use it to buy something. However, there is a provision called "minimum deposit" when you want to open a new account.

The money that you deposit into the checking account goes into the deposit transaction. That is, you can use the money at any time, and it's liquid. You don't have to wait for a long time to thaw.

Another definition of a deposit is when a portion of the funds is used as collateral, or collateral in the delivery of an item.

In short, as a matter of good faith, some contracts require a percentage that you pay before delivery.

For example, brokerage firms require an initial margin deposit when entering into a new futures contract.

Deposit Type

Generally, deposits are divided into 2 parts, namely hiro and time deposits. In addition, bBoth demand deposits and time deposits have their own variations. The following is an explanation of the types of current accounts and what a time deposit is.

Line of Business

Giro is a type of deposit that you can immediately liquidate or take. However, giro has very small interest. Current accounts are divided into 3, namely checking accounts, savings accounts, and money market accounts.

Checking account

You may already be familiar with checking accounts. With a checking account, you can withdraw money at any time.

Therefore, you can access funds easily, and you can also transact online, as well as via cell phones and ATMs.

Saving account

Savings accounts allow you to store money safely, so you can save enough money for future needs. Unlike checking accounts, savings accounts don't provide much freedom, and there may be withdrawal limits and additional fees.

Money Market Account

Money market accounts often have many of the same benefits as savings accounts, but you also have access via checks and debit cards just like checking accounts.

The downside to money market accounts is that some banks may still choose to limit transactions and impose penalties. In addition, the minimum deposit for a money market account is generally higher than for a regular savings account.

Time deposit

Another type is a time deposit. If a bank deposit has a fixed term interest rate, it is considered a time deposit. Therefore, with time deposits, you are not allowed to withdraw money for a certain period of time. Time deposits also consist of several types.

Both demand deposits and time deposits have their own variations. The following is an explanation of the types of demand deposits and deposits.

Deposit Advantages

Deposits offer quite interesting benefits depending on the type you choose. This is a summary of the advantages that you can have if you choose a deposit as an investment.

Competitive Interest Rates

People prefer time deposits to regular savings because the interest rates are much higher, even up to three times. The return on deposits obtained is higher after saving money for a certain period of time. 

There are no administration fees on deposits, so the funds you invest don't decrease.

Favorable Investment Facility

Currently, there are many investment instruments that promise profit, but their safety is not guaranteed. Deposits are one of the safest investments because they are guaranteed by LPS. Prices of deposits tend to be stable and maintained.

Smaller Investment Risk

If you want to invest, but are worried about the risks involved, choose a time deposit. Deposits do not recognize market fluctuations and price changes, so they are less risky than stocks or other investment instruments.

So, that is information about deposits that you need to know. Make sure whatever investment you are going to make, you have considered it well!