Should you still open a term deposit account in 2024?
A time deposit, also known as a term account, is an interest-bearing account with a predetermined rate of return. In 2023, this product gained popularity due to its high returns and the predictability it offers. However, the adjustment to monetary policy in 2024 could change the landscape.
A term deposit allows you to set aside your money for a fixed period, ranging from one month to several years (usually 4 or 5 years, or even longer). The funds are invested at a fixed and guaranteed interest rate, which varies from bank to bank. This feature reassures savers, as they know exactly how much they will earn at the end of the term. In addition, the amounts deposited are protected by the Deposit Guarantee and Resolution Fund (FGDR) up to 100,000 euros per depositor and per institution, which eliminates the risk of capital loss on the amount invested.
A time deposit may offer a higher return than regulated savings accounts
The return on time deposits reached or exceeded 3.50% in 2023, according to data from the Banque de France. This represents a slightly higher return than that of the Livret A savings account, which is capped at 3% until early 2025. Thus, by tying up your money for a set period, you can earn a higher return than with the Livret A. Furthermore, knowing exactly how much you’ll earn and for how long is an advantage in an unstable economic climate.
Is a time deposit a wise choice in 2024?
This is a question worth asking in 2024, as the economic situation is changing. In 2023, the restrictive interest rate policy helped boost returns on savings. However, the European Central Bank’s (ECB) shift toward easing its monetary policy could bring this boom period to an end.
Is the term deposit at risk? Not really, if you opt for a fixed rate. In fact, in this case, even if rates were to fall in the coming months (as some observers and economists believe), the return would still be attractive. The catch is that you have to agree to tie up the funds for a set period, with no possibility of withdrawals or additional deposits.
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