When choosing a bank to conclude a deposit agreement, a potential depositor has to compare several parameters: interest rate, placement period, frequency of interest payments, the possibility of additional investment, conditions for early termination of the agreement. The client also often hears from a banking specialist the concept of " capitalization of the deposit" And " interest capitalization". What is it and what benefits does the client receive from such deposits?
Capitalization of the deposit
Capitalization of the deposit is an increase in the original amount by the amount of accrued interest. At the same time, in the next period, interest is accrued on the initially invested cash. Upon expiration of the agreement, the bank will simply transfer the principal amount and accrued interest to the current or card account.
The agreement may also provide for automatic extension of the deposit with capitalization. This means that if the depositor does not apply to the bank on the day the contract ends, it will automatically be extended for the same period, and interest will be added to the investment amount.
implies the addition of accrued, according to the agreement, interest to the principal amount of the deposit. The accrual of interest for the next period is already carried out on the increased deposit amount. Thus, the compound interest formula is used, which allows the depositor to receive additional income.
The contract must specify the frequency of capitalization, namely:
- annual capitalization. This option is rarely used, only for long-term deposits.
- Quarterly capitalization. Interest is accrued and added to the initial deposit amount 3 months, quarter or year after the opening of the contract. Such capitalization will bring the investor a higher income than the first option.
- Monthly capitalization - interest is added to the principal amount of the deposit at the end of each month. This scheme is the most common among banks and is in good demand among depositors.
- The highest income comes from daily capitalization, but it is not used by Russian banks.
The general formula for calculating capitalization income is as follows:
K \u003d S * (1 + r / m) m * n, where
TO - total amount, which the client will receive at the end of the contract;
S - initial investment amount;
r - annual interest rate;
m - the number of accrual periods, that is, with a semi-annual capitalization m=2, with a monthly capitalization m=12.
n is the number of years.
For example, a depositor wants to put money in the bank in the amount of 100,000 rubles for 1 year at 10% per annum. If the terms of the contract do not provide for the capitalization of interest, then at the end of the term he will receive:
100,000 + 100,000 * 0.1 \u003d 110,000 rubles.
If the borrower collects interest and places the money again within two years, then in three years his income will be:
10,000*3 = 30,000 rubles
With quarterly capitalization the calculation of profit for three years will look like this:
100 000*(1+0,1/2) 4*3 = 134 488,88
Thus, the client will receive an income in the amount of 34,488.88 rubles
With monthly capitalization, the calculation is done as follows:
100 000*(1+0,1/12) 12*3 = 134 818,2
The net income of the investor will be 34,818.2
Thus, from the example it is clear that the more often capitalization is done, the higher the income of the investor will be.
To quickly calculate the profit from bank deposit you can use our online calculator return on investment.
How to choose a deposit?
Interest rates on deposits with and without capitalization differ. To compare the profitability of a particular bank offer, you need to compare the effective rate.
For example, if you allocate 100,000 at 10% for a year, but with a monthly capitalization, then the income will be:
100000*(1+0,1/12) 12*1 = 110 471,3
To get the same return, but without interest capitalization, the annual interest rate should be:
110471.3/100000 = 1.105 or 10.5% per annum.
Deposits with interest capitalization are of interest to investors, the main objective which is getting maximum income. But the profitability of the deposit should be evaluated in terms of the effective rate. Banks very often use deposits with capitalization for marketing purposes, and in fact ordinary deposits bring great benefits to the depositor.
It is worth paying attention to deposits with capitalization when it is planned to place funds on long term(several years) without an annual appeal to the bank to renew the contract. Thus, the required amount is often accumulated by a certain date.
When is it not profitable?
Capitalization is interesting, first of all, with a long-term placement of funds. Regular accrual will be more convenient in the following cases:
- The client wants to receive interest on a monthly basis, considering it as a regular additional income.
- For the client, the possibility of early termination of the contract is important or partial withdrawal. Such banking programs usually do not involve capitalization.
An additional significant advantage of interest capitalization is that once they are added to the principal amount, they are subject to the deposit insurance system. The main condition is that capitalization must be carried out before the date of occurrence insured event. Interest that was accrued, but not capitalized and not paid to the depositor, may be lost in the event financial problems jar.
Hello, friends!
Banks today offer a wide range of deposits: with and without replenishment, with partial withdrawal, with capitalization. It remains only to choose the most profitable. And if everything is clear with the first two conditions, then not everyone is familiar with the third word. Capitalization of the deposit - what does it mean?
This financial term, supported by a mathematical formula, so not everyone can understand its meaning. In the article I will explain everything in simple words and show on concrete examples operating principle. And for understanding it is not necessary to have any special knowledge in the field of economics and banking.
Capitalization – this is the accrual of interest not only on the initial amount of the deposit, but also on all previously accrued interest.
For example, you put 10,000 rubles. at 5% per annum normal conditions. This means that in a year you can withdraw 10,500 rubles. But you decide to leave them on the account without withdrawing them. Then after 2 years you will add another 500 rubles, after 3 years another 500 rubles. etc.
Subject to annual capitalization, after 1 year you will also receive 10,500 rubles, after 2 years you will already withdraw 11,025 rubles, after 3 years - 11,576.25 rubles.
All my calculations were made with a very simple formula:
After 1 year, we will get: 10,000 * (1 + 0.05) = 10,500 rubles.
After 2 years: 10,000 * (1 + 0.05) ^ 2 = 11,025 rubles.
After 3 years: 10,000 * (1 + 0.05) ^ 3 = 11,576.25 rubles.
I already turned to the definition of capitalization when I analyzed . I compared it with a snowball: the higher the initial amount of money in the account and longer term savings, the higher the return. But the effect depends not only on these two factors, but also on the frequency of accrual of interest on the account. Let's see how this affects the change in the amount of the deposit.
Frequency of accrual of income
Above in the formulas, we considered the option when the yield is calculated once a year. In addition to annual capitalization, there are:
- monthly,
- quarterly
- daily.
The calculation formula will change its appearance a little:
The letter n appears - this is the frequency of accrual of income.
At monthly accrual n = 12, quarterly n = 4, daily n = 365 or 366.
Let's compare the action of the "snowball" at different intervals. Let's leave our initial conditions.
As we can see, the more often interest is charged, the higher our profitability. The differences seem very insignificant, but once again I repeat that 4 factors affect the efficiency:
- The initial amount of the deposit.
- Interest rate.
- accumulation period.
- Frequency of accrual of income.
With an increase in any component, the effect will become more impressive. To illustrate, let's make a similar table, but change the conditions:
- initial amount - 1,000,000 rubles,
- term - 5 years,
- rate - 7% per annum.
The presented calculation formula applies to any frequency, including daily. But, having studied the offers of banks, I did not find such conditions. If necessary, you can now do the calculations yourself.
Calculation of profitability with and without capitalization
More often, the investor needs to compare not the options for calculating interest, but calculate the amount of the deposit with and without capitalization. I won't bore you with more math. The formulas remain the same. In fact, there is no need to independently calculate something on them. There is a convenient online calculator with capitalization for different periods and frequency.
Let's use one of them and see how our income changes in two options: a contribution of 1,000,000 rubles. at 5% per annum for 3 years.
- Calculation of profitability with monthly accrual (the most common option in the bank).
Thus, it is possible to compare the conditions in various banks and choose the most optimal for you. Please note that we did not consider the option of replenishing the deposit during the term. In this case, the yield will be even higher. The possibility of replenishment can also be set in the online calculator.
What is an effective rate?
One more concept is closely connected with the topic of the article considered today - the effective rate. For example, on the website of VTB Bank, when choosing a deposit, you will see the following table with interest rates.
Here, under the regular rate, there is another one - this is the effective rate. What it is?
The effective rate is the rate taking into account capitalization. She is always taller than usual. It is convenient to use it when you compare the profitability of several banks.
I remind you that n is the frequency of income accrual.
Let's calculate the effective rate, for example, on the "Save" deposit from Sberbank. We put 100,000 rubles. at 4.2% per annum for 1 year with monthly capitalization. The effective rate will be:
Let's check with the online calculator on the bank's website.
As you can see, the effective rate is 4.28% per annum, with the usual 4.2%.
An alternative to a deposit - interest on the balance
I want to go a little from the other side to the issue under consideration and analyze an alternative to a bank deposit - a debit card. I will share mine personal experience its use.
We needed to spread the money into different accounts in order to accumulate for our purposes. As a result, according to certain criteria, we settled on the following options:
- Deposit "Renaissance Accumulative" in the bank of the same name.
Conditions: rate of 6.75% per annum with monthly accrual of income, the possibility of replenishment, but without debit transactions. The term of the deposit is 1 year, during which the rate does not change. At the same time, we replenish it monthly, but do not withdraw money.
- Debit card of the same bank with interest on the balance.
Conditions: free service with a balance of at least 30,000 rubles. and monthly accrual of income in the amount of 7.25%. It turns out that if you do not carry out transactions on the card, then every month income is accrued both on the initial amount and on previously accrued interest. And the amount of income is much more than the contribution.
Since both the deposit and the card were opened with the aim of saving, we did not make debit transactions. Both products were replenished regularly every month. With such initial data, the advantages of a debit card are obvious to us:
- the possibility of replenishment and withdrawal if necessary without any penalties,
- more income than on a deposit,
- The card is always at hand, you can use it on any day of the week and time of the day.
But there is also a minus: the interest on the account balance can change at any time.
There are not so many offers for debit cards with interest on the balance, but they do exist.
Pros and cons of capitalization
Despite the obvious advantages of capitalization, which are manifested primarily in a higher yield compared to the usual interest calculation, it also has disadvantages:
- As a rule, the bank limits the mobility of funds. That is, you can not manage your money during the term of the contract. Of course, you will not be refused when you declare that you are closing the account and withdrawing all the money. But you will receive far from the amount that you expected when you opened the account. Not all banks allow you to withdraw money without losing all or part of your income.
For example, if you decide to close the “Save” deposit in Sberbank ahead of schedule (100,000 rubles for 1 year), then you will receive 2,862.61 rubles in your hands. less.
- Banks often charge more low rate on deposits with capitalization. Therefore, it is very important to calculate the effective rate and compare it for several offers in different banks.
- A noticeable effect of capitalization is manifested only in the long run. Therefore, if you are sure that in the next few years you will not need a lot of money, open a deposit with capitalization. If not, take a look at ordinary deposit, but with the possibility of withdrawal.
Banks sometimes offer to choose the option of using the accrued income: leave it on the account or withdraw in cash (transfer to a card, account). If you choose to “withdraw interest” on the deposit, then there will be no capitalization at all. After all, you leave on your account only the amount of the initial investment.
Conclusion
At the end of the article, let's write with you the algorithm for choosing a deposit with capitalization:
- We determine the purpose of opening a deposit: savings, short-term or long-term accumulation, receiving passive income.
- We determine the conditions: with the possibility of replenishment, partial withdrawal or without, the initial amount, term and interest rate.
- We select several banks that best meet our criteria.
- We calculate the effective rate for each offer and make the final choice.
Don't forget to analyze debit cards with interest on the balance. This option is for strong-willed people, because the temptation to spend everything can defeat the desire to save. But, if there is a specific goal, then temptations have no chance. Do you agree?
By placing their savings on bank deposits (deposits), everyone seeks to improve their financial position by increasing the return on deposits. Therefore, as a rule, preference is given to deposits with the highest interest rates. This tactic is not always successful, which will become clear when we calculate the deposit. When placing deposits, it is always desirable to take into account the capitalization of income. In order to calculate the deposit and determine the profitability of deposits, let's first consider what interest calculation options are used by banks. Consider the four most common options for calculating interest:
- accrual of interest at the end of the term on the deposit (the deposit is not prolonged, interest is not capitalized),
- accrual of interest at the end of the term on the deposit (capitalization of interest occurs when the term of the deposit is extended),
- quarterly interest accrual (and interest capitalization quarterly)
- monthly accrual of interest (and capitalization of interest monthly)
To understand what is the profitability of deposits and what is the difference between the calculation options, we will consider 4 options. The calculation of interest on the deposit for them was compiled by me according to one conditional example. The following parameters are taken as a conditional example for calculating the deposit:
- deposit amount - 300,000 rubles.
- deposit term – 12 months
- interest rate on the deposit - 10.75% "annual"
- indicative calculation period in examples - 2 years
| Monthly deposit amount: | Interest income | Deposit amount (2 year) | Interest income |
|
|---|---|---|---|---|
| 1 month | 300 000,00 | 300 000,00 | ||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 300 000,00 | 300 000,00 | |
||
| 12 month - 1 year | 300 000,00 | 300 000,00 | ||
| Annual total | 332 250,00 | 32 250,00 | 332 250,00 | 32 250,00 |
The annual yield of deposits amounted to 32,250 rubles. (300,000 rubles * 10.75% / 100% = 32,250 rubles). With the annual re-registration of the deposit, the income for two years will be 64,500 rubles. (32250 rubles * 2). According to this example, the capitalization of the deposit is not provided, and there is no capitalization of interest, because. interest accrued for the first year is not directed to the deposit.
Option 2 - Interest is accrued at the end of the deposit term, capitalization of interest occurs after the prolongation of the deposit for the next term.
| Monthly deposit amount: | Deposit amount by months (1 year) | Interest income | Deposit amount (2 year) | Interest income |
|---|---|---|---|---|
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 1 month | 300 000,00 | 332 250,00 | ||
| 12 month - 1 year | 300 000,00 | 332 250,00 | ||
| Annual total | 332 250,00 | 32 250,00 | 367 966,92 | 35 716,92 |
At the time of the prolongation of the deposit for the second year, the amount of the deposit, taking into account the capitalization of interest, amounted to 332,250.00 rubles. The profitability of the deposit for two years amounted to 67,966.92 rubles. (32250.00+35,716.92), including the profitability of deposits only due to the capitalization of the deposit - 3,466.92 rubles. (35,716.92-32,250.00)
Option 3 - Interest is calculated quarterly with interest capitalization. Capitalization of the deposit is carried out quarterly.
| Monthly deposit amount: | Deposit amount by months (1 year) | Interest income | Deposit amount (2 year) | Interest income |
|---|---|---|---|---|
| 1 month | 300 000,00 | 333 573,54 | |
|
| 300 000,00 | 333 573,54 | |
||
| 300 000,00 | 8 062,50 | 333 573,54 | 8 964,78 |
|
| 308 062,50 | 342 538,32 | |
||
| 308 062,50 | 342 538,32 | |||
| 308 062,50 | 8 279,19 | 342 538,32 | 9 205,71 |
|
| 316 341,69 | 351 744,03 | |
||
| 316 341,69 | 351 744,03 | |||
| 316 341,69 | 8 501,67 | 351 744,03 | 9 453,12 |
|
| 324 843,36 | 361 197,15 | |||
| 324 843,36 | 361 197,15 | |||
| 12 month | 324 843,36 | 8 730,18 | 361 197,15 | 9 707,16 |
| Annual total | 333 573,54 | 33 573,54 | 370 904,31 | 37 330,77 |
With quarterly accrual of interest and prolongation of the term on the deposit for the second year, the amount of the deposit, taking into account the capitalization of interest, by the end of the second year amounted to 370,904.31 rubles, the profitability of the deposit was already 70,904.31 rubles, including from interest capitalization - 6404 .31 rub. (70904.31 - 64500.00).
Option 4
- Interest is accrued monthly with capitalization of interest. Capitalization of the deposit is carried out monthly.
| Monthly deposit amount: | Deposit amount by months (1 year) | Interest income | Deposit amount (2 year) | Interest income |
|---|---|---|---|---|
| 1 month | 300 000,00 | 2 687,50 | 333 887,42 | 2 991,07 |
| 302 687,50 | 2 711,58 | 336 878,49 | 3 017,87 |
|
| 305 399,08 | 2 735,87 | 339 896,36 | 3 044,90 |
|
| 308 134,95 | 2 760,38 | 342 941,26 | 3 072,18 |
|
| 310 895,33 | 2 785,10 | 346 013,44 | 3 099,70 |
|
| 313 680,43 | 2 810,05 | 349 113,14 | 3 127,47 |
|
| 316 490,48 | 2 835,23 | 352 240,61 | 3 155,49 |
|
| 319 325,71 | 2 860,63 | 355 396,10 | 3 183,76 |
|
| 322 186,34 | 2 886,25 | 358 579,86 | 3 212,28 |
|
| 325 072,59 | 2 912,11 | 361 792,14 | 3 241,05 |
|
| 327 984,70 | 2 938,20 | 365 033,19 | 3 270,09 |
|
| 12 month - 1 year | 330 922,90 | 2 964,52 | 368 303,28 | 3 299,38 |
| Annual total | 333 887,42 | 33 887,42 | 371 602,66 | 37 715,24 |
With monthly interest accrual and prolongation of the term on the deposit for the second year, the amount of the deposit, taking into account the capitalization of the deposit, by the end of the second year was 371,602.66 rubles. The return on deposits for two years is 71,601.00 rubles, including the return on deposits due to interest capitalization reached 7,102 rubles.
The above examples allow us to conclude that the profitability of deposits is the most significant with monthly accrual and capitalization of the same interest. Therefore, when choosing the type of deposit, it is necessary to pay attention to Special attention the frequency of interest accrual and the availability of capitalization.
In this article, I did not consider the issue of calculating interest on the amount of a demand deposit, since the interest rate on these deposits, as a rule, is minimal, and even long-term storage of funds on them does not give tangible income.
Now let's look at an example of how sometimes choosing a deposit based on the principle of the highest interest rate on a deposit can reduce the profitability of deposits, if you do not take into account the presence or absence of interest capitalization and their frequency.
Conditional example parameters: Deposit in the amount of 300,000.00 rubles. The term of the deposit is 1 year. The investment period considered in the example is 2 years.
These 3 examples show that sometimes with a lower interest rate on a deposit, you can get more income. In addition, this calculation confirms that when choosing the best option for obtaining income from investing funds, it is always necessary to make an additional calculation of the deposit, specifying the frequency of interest accrual and the availability of capitalization of deposits and interest.
Concluding my analysis of the calculation of deposits and capitalization of deposits, I wish you good luck in choosing a bank for cooperation and choosing the best option for allocating capital. In order not to be mistaken, look at the interest rates in several banks.
Money should not lie idle ─ they should work and bring profit to their owner. This simple rule is known to many. When there are free financial resources a person faces the question of their reliable and profitable investment.
Most of our fellow citizens are not experts in investment and financial analytics. Therefore, they prefer the simplest and most well-known way - to open a bank deposit and receive interest on invested funds. Studying the numerous offers of different banks, they come across some unknown terms that determine the conditions for placing funds and the amount of income received. With one of these terms, which is called capitalization, we will deal with this article.
What is the capitalization of interest on a deposit
Despite the rather unusual name, the essence of the concept of capitalization of interest on a deposit is quite simple: accumulated for a certain period (most often for a month) interest is added to the principal amount of the deposit. In this case, the size of the deposit increases, and the next accrual of interest is already made on a larger amount.
Thus, income is brought not only by the initially placed funds, but also by all the interest accrued on them. This scheme is sometimes called compound interest deposit, because the final, or effective, rate on such a contribution is higher than the original one.
The most popular today are deposits with monthly, quarterly and annual capitalization percent. Deposits with daily and weekly capitalization rarely appear on the market. It is important to distinguish between the frequency of interest accrual and the frequency of capitalization of the deposit. For example, a bank can charge interest daily, and add monthly to the main body of the deposit.
There is a tool very similar to a deposit - a bank bill. Click the link to find out what a bill is and how the bill is settled. Interesting fact: defaults on bills occur much less frequently than on bonds.
In conclusion, let us give some advice on choosing the method of placing financial resources in a bank, taking into account the topic of this article - the capitalization of interest.
- When choosing an accumulation strategy, it is necessary to take into account existing opportunities at the present time and assess possible needs in the near future. If you are sure that the available money will not be needed in the foreseeable future, you can look for a deposit with the highest effective rate, including the one obtained with the help of capitalization. If there is no such confidence, it may be worth sacrificing this option in favor of, for example, partial withdrawal - but keep in mind that most often when early termination of the bank deposit agreement, you lose all the interest earned.
- In the process of choosing a specific program, it is necessary to analyze all the offers of the bank, both with and without interest capitalization. Comparison of the conditions for placing money should be carried out based on the size of the effective rate. Relevant information can be obtained from bank employees or as a result of calculations using a deposit calculator on the website of a financial institution.
- No matter which type of deposit you prefer, special attention should be paid to the reliability of the bank. Information about this can be obtained from independent ratings, analysis of the structure of assets and the list of owners. Important factors are also the time of existence of the bank, its reputation and image. Well, it goes without saying that the organization to which you want to entrust your money must be part of the insurance system. bank deposits, which provides state protection for all placed deposits up to 700 thousand rubles.
Almost always, the choice of a bank is a compromise between its reliability and the status and interest rate.
Thus, deposits with interest capitalization - great way to enlarge the rate valid at the time of opening the deposit for those who have money and want to invest it in order to maximize their savings. If the resulting effective rate on a deposit with capitalization is higher than in a regular placement with other equal conditions, feel free to accept the terms of such a deposit and get additional profit.
255 Reading time: 5 min.In the process of choosing a financial and credit organization to entrust their savings, a person has to analyze a lot of factors: the duration of the deposit, the interest offered, the possibility of replenishing the account or early termination of the contract. Capitalization of deposit and interest- This is another important parameter on which the potential profit will depend.
What is called the capitalization of the contribution
In the contract, banks often prescribe automatic prolongation and the receipt of interest on a current account, which is very convenient for a person. On the day the contract expires, he does not need to go to the bank and re-conclude the contract. It will continue to operate on the same conditions, interest will be added to the deposit amount each time.
Depending on the conditions for placing money on the account, capitalization is different:
- Annual. Rare today, mostly possible in relation to long-term deposits. The amount of % accumulated over this time period is added to the amount of the contribution only at the end of the year;
- Quarterly. More popular, interest is calculated every 3 months;
- Monthly. The scheme is very common and is great for the client, because it brings a higher income than the previous version;
- Daily. Brings the greatest profit, is not practiced by banks in the territory of the Russian Federation;
When the deposit period expires. Interest will be accrued at the time the depositor withdraws the deposit from the account.
Why capitalization is needed and what is its essence
The explanation of the capitalization term is simple: the interest accumulated over a certain time period is simply added to the amount of the deposit that a person placed in a bank. This leads to an increase in the amount of the deposit, therefore, at the next capitalization, interest will be accrued on a larger amount.
This is especially noticeable when capitalizing each calendar month and every quarter. Thanks to such manipulations, a person receives income not only from the initially deposited amount. If the agreement allows for the possibility of replenishing the account for any amount, thanks to this interest calculation scheme, the client will earn even more. Due to the complexity of performing calculations of possible profit, the scheme is called " compound interest". The final (effective or real) rate under such an agreement will be higher than that originally stated.
Today, in the banks of the country you can find various deposit programs with capitalization. The exception is the daily scheme, which is practically never found on the market.
It is important not to confuse the capitalization period with the interest accrual period. The latter can occur every day, but the total amount of interest will be added to the deposit body quarterly.
The benefit is obvious, but in reality, such deposits are usually issued under more low interest than ordinary ones.
Therefore, it is necessary not only to compare the interest rate, but also to evaluate the frequency of capitalization and calculate the possible profitability in a particular case.
What is needed to calculate the income from capitalization and is it really profitable
For this purpose, the formula is used:
I=S*(1+r/m)m*v, here:
I - the amount of funds that the client receives as soon as the contract expires;
S - deposited amount at opening;
R is the rate determined by the contract;
M is the number of accrual periods (for example, with monthly capitalization, the value is 12);
V is the period for which the deposit is open.
Example. As an example, consider a deposit for a period of one year, at 6.5% per annum and in the amount of 5 thousand rubles. According to the agreement, capitalization will be quarterly. It is most convenient to calculate the profit from the effective interest rate in just a few steps:
6.5/100/4=0.016 - we get the interest rate for the deposit in this example;
Interest after the end of the 1st quarter is 81 rubles. (5000*0.016);
For the third quarter we get 82 rubles. by carrying out simple calculations (5000 + 81.25) * 0.016;
By analogy, we consider the third quarter - (5000 + 81.25 + 82.57) * 0.016. Total 83 rubles;
Total for the year, to 5 thousand of the initial deposit amount, we add interest for the entire period of 81 rubles, 82 rubles. and 83 rubles. We multiply the amount received by 0.016 \u003d 85 rubles.
In total, from the amount of 5,000 rubles per year, a person will receive a profit of 333 rubles. The initial rate was 6.5% per annum, but now, taking into account capitalization, we see that the effective rate is 6.69%.
To do this, we divide the value possible income for the initial investment. It is most convenient to perform calculations of potential profit using an online calculator for this or ask bank employee do it. The example clearly shows that the frequency of capitalization has a direct impact on the client's income.
If a person makes a deposit on the same terms, but without capitalization, he will receive only 325 rubles.
Calculate the profit from this banking product many times easier: just divide the amount by the number of months for which the deposit is opened. If a citizen chooses a regular program, within the framework of it, interest is not added to the deposit amount, but is paid in a specified way. This could be a bank transfer payment card or cash payment.
Which deposit to choose: with or without capitalization
The annual rate in both cases is different, so to calculate the profitability of a particular program, you must use a calculator. First of all, you need to calculate the effective interest rate - this indicator reflects the client's profit, taking into account interest capitalization.
If the owner of the deposit wants to get the maximum profit, he needs to pay attention to deposits with a monthly (in last resort with quarterly) capitalization, other offers will not be so profitable. The principle of operation is simple: in the first month, interest is accrued on the deposit amount, then they are added to the body of the deposit. In the second month, the same fixed interest rate will be charged on the deposit + interest for the first month. Thus, the final profitability of the program is many times higher than if a person gave preference to a deposit without capitalization.
Example: deposit in the amount of 100 thousand rubles at 10% per annum and with capitalization every calendar month. The potential income from it will be equal to 100 thousand rubles * (1 + 0.1 / 12) 12 * 1 = 110,471 rubles. To have the same income, the rate must be 110471.3 / 100000 = 10.5% per annum. The calculation example is the most simplified, we will not take into account the possibility of replenishing an account, changing currencies and other parameters. But here you can clearly see what is the advantage of a deposit with capitalization.
Please note that as a promotional move, banks may offer deposits with capitalization, but when performing calculations, it turns out that a regular program would be more profitable. Therefore, it is so important to find out the effective rate and not become a victim of marketing. A capitalized deposit can be especially attractive for people who place funds in a bank account for a long period of time. If you also find an offer with automatic renewal, this will eliminate the need to go to the bank every year and renegotiate the contract.
At the same time, when placing a deposit for a long period, it should be remembered that if the client wishes to terminate the agreement ahead of schedule, the rate is usually recalculated at the minimum established for demand deposits. This results in a complete loss of profit. That's why
if there is a possibility that the funds from the account will have to be cashed out ahead of time, look for a program with the possibility of early withdrawal.
All the negative and positive aspects of capitalization
At first glance, everything is obvious: deposits with capitalization are more profitable than ordinary ones. Although this option is not suitable for all clients. Some want the interest to be accumulated in a separate account so that they can be used as an addition to wages, kind passive income. Others want to be able to withdraw part of the funds from the account at any time in case of unforeseen situations or economic problems. Usually in programs that allow partial or complete early withdrawal, no capitalization.
In many banks, the rate on a deposit with a capitalization is lower than under a regular program. So it turns out that those 0.5-1% that can be earned through capitalization are offset by a lower rate under the contract. In such a situation, the client needs to carefully calculate the benefits of both proposals and choose the best one. If you have free finances and a desire to get the maximum, a contribution with capitalization will help with this.
Finally
Capitalization of interest on a deposit is a convenient option for saving, while the interest calculation scheme is transparent and understandable. However, it is impossible to focus only on this parameter when choosing a program.
It is necessary to take into account:
- Your needs in the coming months and in the future. If there is no urgent need to withdraw funds in the future, choose capitalization;
- Pay special attention to checking the reliability of the bank. He must necessarily take part in the deposit guarantee program, which will allow him to return his hard-earned money even if the organization's license is revoked.
- If the bank is verified, and the effective rate received is higher than under conventional programs in other financial and credit organizations, it makes sense to choose this option. This will allow you to get the maximum benefit.