At many banks, you’ll find that there are certain deposit products (usually just called bank accounts) that have an interest rate that is much higher than usual.
These typically have the same features and characteristics as the normal version, including the option for ATM cards, the availability of online transfers, and coverage by the Philippine Deposit Insurance Corporation or PDIC.
If you’ve seen such products and been tempted by their high-interest rate and liquidity (as opposed to a time deposit), you may have wondered if these are worth putting your money into.
The short answer is that they have advantages but limitations. For the full answer, just keep reading.
What are their advantages?
The interest rate of such deposit products, which is usually higher than that of more-typical savings accounts, is a definite advantage. While being boosted, your returns will still be predictable in terms of how much you’ll earn and when you’ll get them.
In addition, the PDIC coverage will also help add some reassurance that your money is safe. With this, each depositor is insured for up to P500,000 per bank for all individual accounts combined, and the same amount is set for the total of all joint accounts owned.
Bank accounts also have high liquidity, since your deposit can easily be withdrawn through different channels, including at an ATM, through a branch, or via online transfer. This reduces the chances that you’ll have a hard time accessing your money, so you can use it practically at a moment’s notice.
What are their limitations?
There are a few limitations of high-interest bank accounts. First is that, while your money can grow faster than it would in a regular bank account, it won’t increase any more than the set rate. This is something to consider in the context of reaching a money goal.
This leads to another possible limitation: depending on the specific account and bank, the interest rate may change. Sometimes, these are promotional rates that are only effective for a certain period, after which they change to a lower figure.
While this new rate might still be higher than that of a normal account, it would affect the speed of your money’s growth and so you’d need to adjust your time horizon to earn your desired amount.
What should you keep in mind?
In the end, these high-interest bank accounts can be a viable place to put some of your money so it can grow. You’ll need to keep the limitations in mind and practice diversification to maximize your earning potential while managing your risk.
Remember also that you should be familiar with all the terms and conditions of any product, whether deposit or investment, that you’re thinking of putting your hard-earned money into. That way, you’ll be able to make informed decisions that fit your situation.
