If you have some idle money that is not in demand, then learn how to save money in the bank. Not only are your funds safe but also lucrative over time. This profit is called interest savings. This interest is calculated based on the interest rate provided by the bank. The higher the interest rate, the higher your interest earned.

Depending on the type of deposit as well as the bank, you have different ways to calculate interest rates. Normal interest rates will be set by the bank and comply with the regulations of the State Bank of Vietnam.

Knowing how to calculate interest rates 

  • Calculating interest rates on savings accounts

For savings accounts, depositors can withdraw money at any time, even at the start of setting up the account without notice. However most banks will have a minimum balance required for a savings account. Either way, when you choose to save in a savings account, you should know the formula to calculate interest rates:

Interest = Principle x Interest rate (% / year) x Years / 360

  • Calculating interest rates on term deposits

When you open a term deposit this means that after a certain period of time your deposit with mature and the funds will be withdrawn to your designated account. Banks offer a selection of terms by week, month, quarter, or year, depending on the individual needs of each customer. The calculation formula would look like this:

Interest = Principle x Interest rate (% / year) x Term  / 360

Or
Interest = Principle × Interest Rate (% / year) / 12 x Number of Months
Term deposit interest rates are usually higher than savings accounts and have a competitive yield. If you allow the term deposit to mature at the end of the term, you will receive the entire interest rate. Today, most people choose this method.
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Simple saving interest rate (photo: Internet)

QUESTIONS TO ASK WHEN OPENING A BANK ACCOUNT

Question 1: How to calculate interest rate after maturity of the term deposit? What happens to funds after the due date? 

Almost all banks apply the following method to calculate interest rates on savings when the maturity date is due, as follows:

Interest will automatically be credited to the account and the account will move to the next term (the same term you originally selected) with new interest rate at the time of renewal. If your term deposit has expired , the bank will automatically renew it for a shorter term close to the initial term.

The formula is:

Interest = Deposit amount x Interest rate (% / year) x Number of days actually deposited / 360

Question 2: You have saved a small amount in a fixed term savings account,  but with a busy work schedule,  you have forgotten the due date. You want to renew the term but you decide not to add more funds to the account. How to calculate the applicable interest rate for the renewed term based on the initial account balance?

In this case, Interest will be calculated based on the interest rate & term . Interest days are calculated from the maturity day to the date on which your savings account is closed. The highest interest rate is about 1% per year.

But don’t worry about the due date as most accounts are renewable. If the original deposit amount was 100 million, and the interest rate for one year was 7% per annum, the interest you earn in 1 year will be 7 million.

After one year of completion of term without settling the account, the default interest of VND 107 million will be added to your account. If at this time of maturity, the interest rate of the subsequent year is 6% per year only, then this new interest will be applied at the time of auto-renewal with the new term.

  • Interest calculation for year 2: 

Interest in this new term will be 107 x 6% = 6.42 million.

Total 2-year profit is 7 + 6.42 = 13.42 million.

 With the original amount of 100 million VND after 2 years accumulates to 113.42 million.

  • Early settlement in the middle of the year:

Assuming that non savings account interest at the time of settlement is only 0.5%. ( usually less than 1% )

Interest for the second half: 107 x 0.5% / 360 x 180 = 0.2675 million.

The interest for a year and a half will be 7 + 0.2675 = 7.2675 million.

With the original amount of 100 million, after 1.5 years accumulates to 107.22675 million.

 

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Interest rates are not as hard as you think (image: Internet)

Avoid unwanted situations and keep your interest rates up to date, Timo has just the solution to help save you money:

  • You should be able to see the bank’s daily interest rate table to choose the appropriate time to open a term deposit
  • Enter the amount of money you would like to contribute to accurately calculate the amount of returns you will receive at the time of maturity at the best interest rate.
  • You should withdraw your savings at the maturity date, which will earn the best interest, as the current interest rate is only 1% per annum
  • In case of maturity, all funds from the Term Deposit will automatically be transferred to the Spend Account and you will be notified via email or in the Timo App.
  • Timo always recommends to split 1 deposit into 4 smaller deposits with flexible withdrawal for each. If you decide to withdraw a couple of TD’s early, you can continue to earn interest on the remaining deposits.
  • Customise each Term Deposit with a name so there’s additional motivation to make it happen.

Hope that this information will help you understand interest rates and smarter savings. If you want to open a Term Deposit with Timo, you can do this in 2 simple steps:

  • Step 1: Login to Timo on the Mobile or Desktop app
  • Step 2: Swipe left on Term Deposit and select choose New TD

  • Timo Term Deposit – Save money online

    • Competitive interest rates
    • Easy, quick and simple to open. Your online savings account, with flexible withdrawal options.
    • Timo recommends splitting your TD’s to still earn interest on those deposits that are not redeemed