The key to a person's material well-being is not only a consistently high income, but also the ability to manage their finances wisely. You can save and increase your savings with the help of bank deposits: however, they often differ in their terms, which can be difficult to understand. In this article, we will explain in simple terms what monthly capitalization of interest on a deposit is, talk about its other types and find out whether it is always beneficial for a bank client.
What is interest capitalization?
To better understand the capitalization mechanism, let's first understand what a bank deposit is.
A bank deposit is a certain amount of money that a client exit mobile number database transfers to a credit institution for temporary use in order to receive income in the form of interest. While the funds are kept on deposit, the bank disposes of them at its own discretion in order to make a profit: it issues loans to other clients, invests in various financial projects, etc. The bank pays part of the income received from investing money during this period to the depositor. The interest rate is set in advance and is specified in the agreement.
There are two types of interest paid on deposits:
Simple - paid at the end of the deposit term;
Complex - added to the savings account gradually, at certain time intervals, and added to previously placed funds.