In deposit terminology, the term Deposit Rates refers to the interest rate paid out on Deposits made to banks and financial institutions. Deposit rates can be fixed or variable, depending on the wide variety of different account types and financial instruments to which a deposit is made.
For example, a bank or other financial institution generally guarantees a fixed Deposit Rate if the customer is willing to leave their money on deposit for a specified amount of time, a year for example. Fixed Deposit Rates are ideal if the customer is concerned about falling interest rates and they can also suit people deriving income from the interest returns on their deposits. Nevertheless, such fixed rate time deposits usually carry penalties for early withdrawal. On the other hand, Deposit Rates for savings and money market accounts are variable, usually with no penalties for early withdrawal. Nevertheless, in many cases, customers must maintain a minimum amount of funds in these accounts to qualify to receive interest payments.