Best Banks for Term Deposits in the Philippines
Banks remain the most popular financial institution for saving money despite the multitude of other options available to consumers. While it is true that bank deposits earn very little, usually less than 1%, there are options that offer higher rates.
To make your money grow, you better choose a term deposit instead of a regular savings account. Note, however, that the term deposit must be in the bank for a while before you can actually earn interest.
Best banks for on-time deposit
As expected, different banks offer different interest rates on their products, including term deposits. Here are some of the best term deposit banks in the Philippines, ranked from highest to lowest in terms of interest rates:
- City savings; 3.50%
- Security bank; 2.30%
- RCBC; 2.125%
- PSBank; 2.00%
- Chinabank; 1.450%
- Metrobank; 1.25%
- Unionbank; 0.750%
- PBCOM; 0.625%
- EastWest Bank; 0.60%
- BPI direct savings bank; 0.50%
- UCPB; 0.50%
- BDO; 0.50%
- BPI / BPI family savings bank; 0.25%
Factors that affect term deposit rates
Besides having different interest rates, these banks also have different terms, minimum deposits, and various rules governing their term deposit products. The following factors affect term deposit rates:
Conditions or duration of the investment
Term deposit rates vary depending on the length or duration of the investment you choose. There are some banks that allow a 30 day term while others require at least 6 months. All banks offer one-year deposit terms, while many accept much longer terms.
As expected, shorter terms mean a lower interest rate. If you want to get the interest rate from the bank, you have to choose the longest investment term.
For example, a deposit of 10 million Php will only earn an interest rate of 1.25% to the City Savings Bank for a period of 30 days, but the same amount can reach an interest rate of 3, 50% if it is placed for 5 years and 1 day.
Besides the length of time you choose for the term deposit, the amount of money you deposit into this special account will also determine the interest rate. At CitySavings Bank, the one with the highest interest rate on this list, a deposit of 50,000 Php will only earn 0.80% for the minimum 30 day placement, but for the same duration, an interest rate 1.25% is offered if you deposit Php10 million or more.
Type of interest chosen
Banks calculate interest rates in two ways: simple interest and compound interest. For simple interest, only the principal amount earns interest. Whether you withdraw the interest you earn or not, the math remains the same.
This is why compound interest is a better option because your money will grow faster this way. Not only will the principal amount earn interest, but the interest you earn will also earn interest as you continue to save your money.
Often, banks will let you choose to earn compound interest on your term deposit; although it will always depend on the term you have chosen.
Other things to know about the time deposit
Take note of the following before putting your money on deposit:
While it is easy to open a term deposit account, you can simply withdraw the money at any time. You must wait for the due date before you can withdraw the money. If you insist on taking the money before the due date, you could incur penalties and get less than what you deposited.
While longer terms mean higher interest rates, it may also be a good idea to choose shorter terms if you think you will need that money in the near future.
Additional deposits not allowed
You also cannot make any additional deposits before the end of the term.
Just like other bank deposit and investment products, you still have to pay taxes on your term deposit. This will follow the standard 20% withholding tax.
Insurance limited by PDIC
Please note that PDIC only insures deposits up to 500,000 Php.
There are a lot of things to consider when choosing the best bank to make a term deposit in the Philippines. Be sure to research, study your options, and compare these banks before making the final decision on where you’ll save your money, how much you’ll save, and how long the term will be.