In this section we will try to briefly describe what deposit accounts are and how they differ from traditional bank current accounts.
The deposit account: what it really is
In a not too distant past, the traditional current account had, among other things, the function of guaranteeing a reasonable yield. Here, then, that depositing one’s money on a current account could be a way of combining the security of the investment with a return which, although lower than that of other instruments, could still be considered satisfactory for a certain profile of investor.
Over time, however, the current account yields have been reduced to practically zero. The traditional current account is now a tool for the practical management of a whole series of activities related to the use of money but has lost all investment value.
Over the years the deposit accounts , which have taken over the investment function now lost from the current account and which protects them from risks (at least on paper), were born and became established over time.
How a deposit account works
A deposit account is characterized by a limited number of functions compared to a traditional current account. In fact, in general, those who want to open a deposit account must already have a “classic” current account (often also at another institution). The advantage is that of being able to take advantage of a higher interest rate than current accounts, often without having the need to constrain the capital.
The deposit account can therefore be easily fed, for example by drawing from the traditional current account related to it. Banks often provide the possibility for the customer to make periodic pre- paid payments , for example in correspondence with the salary credit. And just as easily you can withdraw money from the deposit account as, as mentioned, very often there are no restrictions on the capital invested. In some cases, however, the bank may recognize a greater interest if the client is willing to agree to bind the money for a certain period of time. It is also frequent that the banking institution allows withdrawing the “tied” amounts anyway, with the understanding that in this case, the benefit of the greater expected interest will be less.
Keep in mind, in any case, that the deposit account is, from a technical point of view, a current account, and this has important regulatory implications, as will be seen later.
Online deposit accounts
Precisely because of their nature, as can easily be understood, the deposit accounts are particularly suitable for being managed online, both in the case in which the bank that supplies it operates mainly on the network, and in the case in which the bank is an institution traditional (and the home banking service has obviously been signed). In fact, being able to operate from your PC, you can use the deposit account as a real money box: you can easily pay, perhaps with a transfer or even better with a transfer (if you have a traditional current account at the same bank) and in any moment, as well as just as easily, more often than not, you can withdraw or move amounts to your current support account.
Why open a deposit account
From what has been said so far, and in general, it is clear that the reasons behind the choice to open a deposit account can be multiple.
- At the base of everything there is the will to have a return on one’s money, which, as we have seen, is no longer guaranteed by traditional current accounts.
- Another important motivation is to have a certain return , without the risks induced by market fluctuations. This does not mean that there is no absolute risk, we must always consider the reliability of the institution that proposes the opening of the account, but this is a speech that deserves a deepening that we will not do here.
- Another important reason is the possibility of always having your own money (unless it is deliberately chosen to constrain it to have a higher yield).
- In general, the simplicity of the deposit accounts: it is not necessary to be an expert trader or an excellent connoisseur of market trends to understand the mechanisms. And it is also simple to open a deposit account, no particularly complex procedures are required and in general no guarantee must be given, as the money that can be withdrawn is only the one that was previously paid. And finally, as we have seen, in the case of using these products online it is extremely easy to operate from your PC.