What is the difference between deposits and savings?

  Deposits and savings are banking products that can be chosen by the public to save money. However, these two bank products are not the same. People need to know the difference between savings and bank deposits in order to choose and maximize bank products well.

If you have ever been offered a bank product such as term savings / savings plan then you should know that both products fall into the category of bank deposits. Meanwhile, deposits are bank products that fall into the category of investment products. 

What is the difference between deposits and savings?

In general, you need to know that the types of savings and deposits offered by banks in the community exist in two forms, namely conventional and Shariah. The difference generally lies in providing benefits for customers.

Conventional savings accounts with wadi'ah or titipan, where in principle you leave some money in the bank, then the bank will give you bonuses or profits in the form of interest.

Meanwhile, deposits in Islamic banks berskema mudharabah (revenue sharing). That is, you as the owner of the fund put money in the bank to be channeled by the bank to financing (credit), then the bank's profits from the distribution will be divided with you based on a certain proportion. Where all Islamic banking products (savings and deposits) ensure their customers avoid the practice of riba.

Well, let you not get more curious, cermati.com will review the complete difference between deposits and savings to add to your financial insight. 

1. Deposit Interest Rate Higher than Bank Savings/Deposits

One thing that is a very clear difference is the amount of interest rates. The advantage of putting your funds into a deposit is that it earns higher interest than when placing yours in a savings account.

In 2020, current deposit rates range from 3% to 5% per year, while ordinary savings rates range from only 0.0% to 1%. Not much different, deposit products such as term savings also offer interest rates that are still below the deposit rate.

With this difference in interest rates, of course, you will benefit more if you save money in the form of deposits rather than in ordinary savings. For example, you have $10,000. Funds of this size are better if stored in the form of deposits, where you can get interest in the range of 3% in just a storage period of 1 month only. Profitable isn't it?  

 Asking for interest on deposit interest, you can also invest the deposit interest that you get through the Automatic Roll Over system. Where later, the interest on your deposit investment can increase because of the possibility of compound interest.

2. Flexibility of Taking Money

As you surely know, you can take funds from your savings account at any time. This is the second difference between savings and deposits. Because, if you keep that in deposits, you can not carelessly take or spend your money until the maturity period arrives.

So, understand yes if the money stored in deposits can not be liquidated arbitrarily, there is a certain period (tenor) that must be passed until maturity, then your money can be used.

The range of tenor deposits is 1 month, 3 months, 6 months, 12 months, 24 months. Note, if you take it before the due date, there is a penalty fee to be paid. 

For example, you have a 6-month term deposit, but you have an urgent need and want to take the funds, even though this is only the 2nd month. Then, you make a withdrawal of money from your deposit account, then you will be charged a penalty fee.

So, by understanding this, now you are expected if you want to keep some money in deposits, try to make the money is money / funds that will not be used in the near future.

3. Deposits for Investment, Savings to Save

Higher deposit interest than savings interest makes deposits one of the investment products. As one of the investment products, deposits are the least risky investment products, but the benefits, in terms of interest rates are also the smallest among other investment products such as stocks, mutual funds, and bonds.

Generally, people use deposits as a choice of investment instruments to store emergency funds and education funds because deposits have a very low investment risk and are easy to understand compared to stocks, mutual funds or bonds.

For those of you who are still lay about investment, deposits can be the first step in your investment. However, for those of you who are already adept at investing, deposits can also be chosen as diversification of investment products to minimize risk.

Note, savings products such as ordinary savings and term savings are not a form of investment. Because savings is a place where you put / save money that will be used to finance daily living needs, as well as savings for emergency funds.

Flexible collection of funds, small interest, and a monthly administration fee make savings not included in investment products. Although in deposits there are also administrative costs, but when compared as a whole, deposits remain much more profitable than ordinary savings because the interest received is much higher. 

4. Bilyet and Savings Books

If you open a savings account, you will receive a savings book with a debit card /ATM card facility as proof that you have savings in the bank. In addition, you can open a savings account with light capital starting from Rp100,000,-. Furthermore, you can also use the money stored in the account for various transactions. 

Well, it's different when you open a deposit. When opening a deposit product you will get a proof of bilyet deposit. Bilyet is a proof of ownership that you are the owner of existing funds stored in bentik bank deposit products. As for now thanks to technological advances you can make deposits online and get proof of bilyet deposits in digital form sent in your email.

To open a deposit you conquer a certain amount of funds. Generally deposit products offered by banks in the country start with capital money of Rp8 million - Rp10 million. Tenor options offered are ranging from 1 month, 3 months, 6 months and 12 months. 

Can deposits be destroyed?

Reported by Kompas.com, where an East Java Surabaya resident named Anna Suryani sued PT Bank Central Asia Tbk or BCA because the money deposited in bank deposits was allegedly forfeited after 32 years.

President Director of PT Bank Central Asia Tbk, Jahja Setiaatmadja also explained that there is no term of forfeited deposits. Customer rights will still be granted even if the bilyet deposit is lost, tucked away, damaged, or burned. The right of deposit will be paid at maturity or if requested to be sought at the beginning by the customer.

Asking about this, you don't have to worry. Because the money you store in the bank in the form of depsoito will not be forfeited and the customer's rights have been clearly regulated by the bank.

5. Deposits and Savings guaranteed by LPS

You don't have to worry about storing your money in the bank in the form of savings or deposits. Because the funds stored in the bank are safe and guaranteed by the Deposit Guarantee Agency or LPS. As for accounts and savings guaranteed by LPS the maximum amount of funds is Rp2 billion, for deposits there are special interest rate rules imposed by LPS.

Managing Finances with Deposits and Savings

Deposits and savings have their respective advantages in saving money. These advantages you can use to help you in managing your finances to be better. Place the funds you will use for daily and emergency activities in savings, which can be taken whenever you need.

While deposits for funds that will not be used in the near term, so indirectly you have an investment. By managing finances using deposits and savings, your finances will be more controlled and grow. Good luck!