Time deposit
From Wikipedia, the free encyclopedia
- For an article more specific to the United States, see Certificate of deposit.
A time deposit (also known as a term deposit, particularly in Canada, Australia and New Zealand) is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product.
Note that the M2 money supply includes funds that can be used directly in payment, such as money market mutual funds and money market deposit accounts (MMDAs). MMDAs are considered by the United States Federal Reserve (the Fed) to be savings accounts and are thus exempt from reserve requirements. These large transaction accounts not being included in the M1 money supply suggests that the Fed does not pay much attention to ordinary transaction deposits, and in July 2000, it announced that it was no longer setting target ranges for growth rates of the monetary aggregates.
A deposit of funds in a savings institution under an agreement stipulating that (a) the funds must be kept on deposit for a stated period of time, or (b) the institution may require a minimum period of notification before a withdrawal is made.
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[edit] Small-denomination time deposit
"Small" time deposits in M2 (see money supply) are defined as those under $100,000. That figure is also the limit on FDIC insurance coverage.
[edit] Large-denomination time deposit
"Large" time deposits are currently defined as deposits larger than $100,000. The term "jumbo CD" is commonly used in the United States. Some banks, recognizing that customers do not want more in the bank than is covered by insurance, have lowered the "jumbo CD" minimum requirement to $99,000, so with compounded interest the total falls below the insurance limit.
