◆ What happens after the maturity of the time deposit? What is automatic principal and interest renewal and automatic principal and interest renewal?
Unlike ordinary deposits, which can be taken in and out at any time, fixed deposits are deposited for a certain period of time. There are two types of handling when the time deposit reaches maturity: “automatic cancellation” and “automatic renewal”.
If you don’t plan to use it right away, you can automatically renew your time deposit. Also note the difference between automatic principal and interest renewal.
◆ The period until maturity of the time deposit is 1 week to 10 years
Japan Post Bank’s fixed-term savings have a minimum period of one month, another period of three months, six months, one year, etc., and a maximum of five years. Many city banks and regional banks also handle time deposits of 5 years or more, with a maximum of 10 years.
As a rare type, Tokyo Star Bank also handles deposits that mature in one week, and Shinsei Bank and ORIX Bank in two weeks.
There is a wide range of deposit periods from 1 week to 10 years, but how much is appropriate? Is it better to spend a long time on unused money? When choosing a deposit period, pay attention to interest rates as well as when to spend the deposited money.
◆ Relationship between interest rate and term of time deposit
Interest rates on time deposits tend to be higher for longer periods. But now the interest rates are so low that there is little difference between periods.
Fixed interest rates are fixed in principle, so if you deposit in a long-term time deposit at an ultra-low interest rate, you will have to keep money at a low interest rate, so it is better to shorten the period. It seems better to think about 3 years at the longest from 1 year.
◆ After the maturity of the time deposit, select automatic cancellation or automatic renewal
And the handling when the maturity comes is to be decided at the time of deposit. There are two ways to handle it: automatic cancellation and automatic renewal.
◇ Automatic cancellation
Automatic cancellation ends at maturity. The total of principal and interest (after tax) is deposited in the savings deposit, and the time deposit ends.
◇ Automatic continuation
On the other hand, automatic renewal automatically transfers to a fixed deposit for the same period. You can continue your time deposit again without any hassle. In the case of automatic renewal, the interest rate for the next period will be the one on the renewal date.
Some online commuter passes that you deposit on the Internet can change the handling at maturity by online banking.
For example, the time deposit that was automatically renewed is automatically canceled, and conversely, the time deposit that was automatically renewed is automatically renewed. This is useful if you change your money management schedule on the way.
Some people may use a general account to make time deposits. Since the general account has a mechanism that allows automatic overdraft with time deposits as collateral, in principle, time deposits are automatically renewed.
◆ What is the interest if you automatically renew your time deposit?Difference between automatic principal and interest renewal
If you automatically renew your time deposit
・ Automatic renewal of principal …… A method of automatically renewing only the principal and depositing interest into a savings deposit
・ Automatic renewal of principal and interest …… A method of automatically renewing principal and interest as a time deposit
There are two.
Depending on the bank, you may be able to choose either one yourself, or you may only have automatic renewal of principal and interest. If you want to snowball your money, we recommend automatic renewal of principal and interest.
If the surplus funds are made into a fixed deposit of about one year and the principal and interest are automatically renewed, the interest will be incorporated into the principal at each maturity, and if the interest rate rises in the future, the interest rate on the continuation date will be used again. Since you will be depositing in a time deposit, you can ride the wave of rising interest rates without any hassle.
Furthermore, if you have a contract for online banking, if you want to spend money, you can change the handling at maturity to automatic cancellation online, which is convenient.
Sentence = Ayako Sakamoto (Money Guide)