Termínované vklady, also known as time deposits, have a long tradition in the Czech Republic. However, they are far less prevalent than savings accounts. This is not surprising given that their interest rates are not particularly impressive and are easily outmatched by those offered on savings accounts. Furthermore, one cannot touch the deposit for a specified period to achieve better returns.
According to a recent survey, Czechs are known to be rather conservative regarding investing. They prefer “safe” products such as savings accounts, building savings, and time deposits. Nevertheless, savings accounts are by far the most popular choice, with 55% of Czechs selecting them as the most exciting way to save money, while time deposits were preferred by less than a third of those surveyed.
One of the main reasons for the unpopularity of time deposits is that one cannot withdraw money for a certain period without incurring a penalty. Banks typically use their formulas to calculate this penalty, considering the amount removed and the number of days remaining until maturity, including a percentage of the withdrawn sum. Some banks also impose a minimum fee for early withdrawal or charge a portion of the interest earned. For example, the eKonto Garant time deposit offered by Raiffeisenbank allows one free early withdrawal of up to 20% of the deposit without penalty.
The interest rates on time deposits range from 5% to 6%, depending on the warranty duration. Short-term deposits generally provide the most favorable returns, often more than longer-term ones. For example, Česká spořitelna offers a time deposit with a term of 1 month and an interest rate of 4%, while the same bank offers a 5-year warranty with an interest rate of 2.4%. This contrasts savings accounts, which offer interest rates of up to 6% per annum, although this is usually only on a portion of the deposit.
Despite the low-interest rates, time deposits have their advantages, particularly for risk-averse people who do not want to expose their savings to the fluctuations of the financial markets. In addition, time deposits can provide a guaranteed return on investment, which can be helpful for those who are saving for a specific goal and need to know precisely how much their investment will be worth at the end of a particular period.