What is the capitalization of the contribution. Deposits with interest capitalization: Pros and Cons
Almost every person turns for help to the bank. Sometimes people take loans, sometimes they draw up cards to get paid or payroll. No cost and no deposits when a person gives their savings to the bank at a certain percentage. Such a format for storing funds allows you to slowly but surely accumulate your capital. Considering the variety of available deposits in each of the banks, it is worth considering what the capitalization of a deposit is.
Introduction to the concept
Under the capitalization of savings, it is customary to understand the quarterly or monthly increase in the size of the deposit as a result of adding to the amount of funds in the account the interest that is accrued to the client of the bank within the agreed period. When choosing this partnership scheme, the bank charges not the initial amount of the deposit, but the increased capital - after the accrual within the stipulated time frame.The yield of this category of deposits is much higher than with monthly payments. The only thing is due to the fact that deposits with interest capitalization are issued at a lower interest than all the others. In this way, the bank is trying to protect itself from possible losses. If you take into account even this difference, deposits with capitalization will bring a much higher profit than all the others.
An example of calculating the contribution
In order to understand in more detail the question of what capitalization of a deposit is, let's try to calculate it. This will allow you to see with your own eyes the difference in the format of accrual of funds. For example, a person plans to deposit an amount in the amount of 100 thousand rubles to a bank account. With a standard interest rate of 13% a year later, a bank customer will receive a profit of 13 thousand rubles. If the contribution provides for capitalization, then in the second month of the partnership the bank will charge interest not on the principal amount of 100 thousand rubles, but on a deposit with interest - 101.3 thousand rubles. This, though not a rapid, but very noticeable increase in the deposit. Deposits with interest capitalization are able to bring more profit than they are put into the bank for a longer period. There is no longer notice the difference will not work.
What contribution to stay?
Financial institutions offer a variety of partnership schemes to their investors, and each of them has its own characteristics and advantages. How profitable the client will be to use the capitalization of interest will depend on him. For example, if a person put funds in a bank and intends to get a passive source of income on their basis, then it’s not worth talking about capitalization. In this situation, the most convenient will be the monthly interest payment. It is quite another thing when the purpose of opening a bank account is an increase in capital. Without taking a percentage each month and increasing capital exponentially, it will be possible to achieve the goal much faster.
Unique deposits with capitalization and replenishment
Another interesting proposal - deposits with capitalization and replenishment. It is perfect for those who intend to systematically increase their deposit by depositing new funds on it. In most cases, it will be possible to replenish the account within a month in an amount not larger than the initial amount of the deposit. It is worth saying that there is no single unique and most profitable contribution. Before you give your money to the bank, you need to study the available offers in detail.If the amount is impressive, it is better to resort to the services of several financial institutions at the same time. This will diversify risks. Please note that on the eve of holidays financial institutions offer participation in bonus programs, in accordance with which depositors can deposit money into the account at a higher percentage.
Types of capitalization
Understanding the question of what capitalization of a deposit is, you need to familiarize yourself with its varieties. Accrual of interest, which will be taken into account in capitalization, is carried out in different time intervals:
- Daily interest charge.
- Monthly accrual.
- Annual accrual.
- Quarterly capitalization.
The most common is the monthly capitalization of interest, when a bank deposits a certain percentage of a deposit once every 30 days. From the point of view of benefits and increase of the deposit, the most profitable partnership format is the accrual of interest by the financial institution every day. Unfortunately, this scheme of cooperation is very rare, and it is of little profit to banks.
Non-rechargeable and rechargeable deposits with capitalization belong to the variety of deposits, in accordance with which interest is constantly added to the primary deposit.
The interest on interest is called compound interest. To calculate the compound interest, a special formula is used:
SUM = SUM0 * (1 +%) N, where
- SUM - total deposit amount;
- SUM0 - the size of the initial contribution;
- N is the number of capitalization periods;
- % - interest rate for capitalization periods.
The interest rate is calculated according to the following formula:
% = p * d / y, where
- p - annual interest rate / 100%;
- d - the period of capitalization, which is usually expressed either in days or in months;
- y is the number of days or months in a year.
Modern methods of calculating the profit on the deposit
Today it is not at all necessary to use a complex formula for calculating profits. Almost every bank has a deposit calculator on its official website. Simply enter all the parameters in the specified fields and, by pressing the "calculation" button, get the result.
During the calculations, it is worthwhile to clarify whether interest is accrued on the first day of making the deposit and on the last. This, though not to a significant extent, will still be able to influence the results of the calculations.We draw attention to the fact that bank employees are not entitled to indicate the most profitable deposit. They can only carry out the calculation of deposits with capitalization. The decision on the design of a partnership format will be entrusted to the client, so you will have to rely only on yourself.
Entrepreneurial self-contributors provide for the possibility of obtaining a complicated percentage. Considering the question of what capitalization of a deposit is, it is worthwhile to foresee the possibility of depositing funds to the account, subject to the availability of periodic payments. At the same time, the possibility of deposit replenishment should be open.
This partnership scheme provides certain advantages for bank customers:
- A depositor has a unique opportunity to make his own decision on whether to use a percentage to replenish a deposit. Monthly capitalization may or may not take place. The client has the right to dispose of interest in his own interests.
- When deciding to replenish the deposit with accrued interest, the investor receives all the advantages of compound interest.
- When making a classic rate, the interest on the deposit will be higher than with capitalization. In this case, all the main features of the partnership will remain.
- The list of services of some banks included the ability to automatically transfer interest to the main account without the direct intervention of the client.