The deposit account

If you have money set aside that you want to invest with low risk, you can also do so using a deposit account, also known as a savings account. It is similar to a current account but, on the one hand, it offers higher interest rates, and on the other, it has fewer features and may come with certain restrictions.

What is a deposit account?

A deposit account or savings account is a banking contract, similar to a current account, in which you lend a sum of money to a bank. The bank commits to paying you interest and returning your money either upon request or according to agreed-upon terms and timing. In practice, it's a way to make your savings grow with low risk.

Interest rates on savings deposits are generally higher than those on current accounts but lower than the returns from other low-risk investments, such as Treasury Bills (BOTs). For deposits with an average balance over €5,000, a stamp duty must be paid. Interest income is taxed at a rate of 26%.

However, the types of banking operations you can carry out with a deposit account are limited; you can usually only deposit and withdraw money. Sometimes, you can only do so through a linked current account, which the bank may require you to open. You cannot request an overdraft or temporarily exceed your available balance, meaning you can't use more money than you have. In many cases, you also cannot link payment cards such as debit cards or prepaid cards to the account.

In summary: while a current account is a tool for managing your money on a daily basis and for making and receiving payments, a savings deposit is an investment tool. Parents often use it to set aside money for their children when they are still minors – in such cases, the contract is signed by the parents.

A deposit account can be linked to a "bankbook", which is the document where all deposit and withdrawal transactions are recorded. It used to be in paper format, but today it is often digital.

Remember that in the event of bank difficulties, a deposit account - just like a current account - allows you to benefit from the repayment of deposited amounts up to a maximum of €100,000 per person, per bank, through deposit guarantee systems (the Interbank Deposit Protection Fund and the Depositors' Guarantee Fund).

Types of deposit accounts

Deposit accounts can be:

• unrestricted (demand deposit account): you can withdraw the money you have deposited at any time without penalties;
• time-restricted (time deposit account): you can only withdraw the money at the end of a specified period, usually ranging from 1 month to 4 years. Often, banks allow you to withdraw the money before maturity by paying a penalty, which usually means forfeiting the interest accrued. Generally, the longer the term and the more restrictive the withdrawal conditions, the higher the interest rate offered.