It is always necessary to take into account that compound interest significantly increases capitalization. However, banks, in pursuit of profit, try to limit this effect. Most often, they reduce the interest rate on such a deposit. But we remember that the effective interest rate will be more important than the value specified in the agreement .
The ban on early withdrawal of funds may seem like a minus to some, but this approach disciplines the depositor, forcing him to be thoughtful about his spending.
A deposit with interest capitalization is ideal for philippines country code mobile number long-term savings.
The last advantage also has a serious disadvantage – the depositor cannot terminate the agreement unilaterally without losing the accumulated funds. Before taking money to the bank, you should carefully calculate your budget.
If you may face unexpected expenses during funds are limited, then it is better to choose another banking product.
Among bank offers, you can also find deposits with interest capitalization, where the client can use part of the funds in the account ahead of schedule. However, the interest rate in this case will be even lower, and, upon closer examination, such a product may even be less profitable than a classic deposit.
The increased profitability of compound interest deposits forces some unscrupulous credit institutions to "throw" pitfalls" into their contracts for their clients. As a result, the terms of the deposit worsen after automatic prolongation.
Capitalization of interest on a deposit account
Capitalization may concern not only interest, but also the deposit itself. Many do not understand the difference between these two approaches. But it is significant.