Bank deposits and cash deposits differ in a number of parameters: these include the rate, the frequency of interest accrual, the ability to replenish and withdraw funds from the account,capitalization. In addition, some deposit programs provide for prolongation. Let's figure out what this means, how to use it and what the benefits are for the depositor.
What is a deposit extension?
By placing money on deposit, you enter into an agreement with the banking organization. This is an agreement under which the bank undertakes to pay interest and return your investments on fixed terms. The composition and terms of the deposit agreement are regulated by Article 834 of the Civil Code of the Russian Federation.
The deposit agreement is valid for a certain period: for example, you can invest money for a month, six months, a year, several years. During this period, your funds are kept in a bank account, and you receive interest income.
At the end of the term, the deposit is closed. You take the finland mobile database money and can do with it as you wish. If you want to put your savings back into a bank account at interest, you need to open a new deposit.
However, if you keep your savings on a deposit with an extension option, you can extend the term without withdrawing money from the account or entering into a new agreement.
Thus, prolongation is an extension of the term of the deposit agreement after its expiration. Deposits with the possibility of prolongation are called reinvestable.
Types of prolongation
The agreement can be extended automatically or at the request of the depositor.
Automatic renewal
In this case, the banking organization prolongs the deposit independently without the client's participation. For automatic prolongation, the following conditions must be met:
the account contains the minimum amount required to renew the contract,
The depositor did not make any demands to close the account and withdraw money.
If, according to the terms of the deposit, interest is paid to the same account where the principal amount is kept, then with automatic extension the principal of the deposit increases. It consists of two parts:
the deposit that the depositor made when opening the account;
interest accrued over the term of the agreement.
This approach allows you to increase interest payments, since in the new period the rate will be applied to a larger amount.