In banking terminology, the term Term Deposit refers to a deposit held in an account at a financial institution for a fixed time frame or term. Generally, a Term Deposit is offered for short to medium-term maturities of from one month to several years.
For example, when a bank customer purchases a Term Deposit, they will usually be advised that the money cannot be withdrawn until after the term of the deposit has lapsed or by giving the bank a pre-determined amount of notice before making the withdrawal and paying a penalty. Term Deposits offer the banking customer a higher interest rate than demand deposits and have a very low risk factor associated with them as an investment. The most common type of Term Deposit is a Certificate of Deposit or CD. Term Deposits can also be opened in a Savings Account and can be a useful investment option for the more conservative, risk averse investor seeking to maintain their principal.