Term deposits are usually mistaken as fixed deposits. Let me simplify ‘what is a term deposit’ for you.
A term deposit is basically a type of investment where you put an amount of money locked in for a time period. You cannot withdraw the money before the term ends (unless you’re okay with a small penalty). Once the term is over, you get back your original amount plus the interest earned.
You might be thinking, isn’t this just like a Fixed Deposit (FD)? Logically it seems to be the same but term deposit is a broader term that covers all deposits like recurring deposits, fixed deposits, foreign currency deposits, senior citizens deposits, post office deposits, etc.
You can say fixed deposit is a part of term deposit. When choosing the term deposit decide based on when you’ll need the money i.e. short-term or long-term. And always check the interest rate and compounding frequency (monthly, quarterly, etc.) to make the most out of it.
So next time someone asks “what is a term deposit?”, you can tell them all about it.