Term deposit and demand deposit are two different kinds of fixed deposit accounts that are available to short and long-term investors. They differ in terms of liquidity period and interest rate offered on them.


If you are confused between Term and demand deposit. Here’s what you must know.



Term Deposits


It is also known as time deposits. They are investment deposits made for a predetermined period of time, ranging from a few months to several years. The investor/ deposior receives a predetermined rate of interest on the term deposit over this specified time period. In this case, funds deposited for longer period of time command a higher interest rate. Their interest rates are usually higher than traditional savings accounts.

The depositor cannot withdraw funds from a term deposit account until the end of the chosen time period without incurring a financial penalty, and such withdrawals often require written notice, in advance. At the end of the deposit period, the depositor has the choice of withdrawing deposited funds with earned interest income, or rolling over the funds into a new term deposit.

Demand Deposits


These accounts offer greater liquidity and ease of access as compared to term deposits but pay lower interest rates, and they may also include various fees for handling the account. Depositors can withdraw any or all of the funds in a demand deposit account at any period of time without incurring any penalty or providing prior notice.



Funds which the depositor may need to access at any time that provide the depositor with sufficient personal liquidity to handle his or her regular expenses should be kept in a demand deposit account. Few examples of demand deposit accounts include regular savings accounts, checking accounts, or money market accounts.


In addition, to these, leading NBFCs offer higher interest rate on FD and tax benefits of fixed deposit to investors. To know more check with the lender’s representative to invest wisely.