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Selected Philippine time deposit rates

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Time deposits are very popular among Philippine savers, both small and big ones, because they guarantee earnings from cash you are sure to get back after a certain period (normally 30 days, 90 days, and 180 days). That’s of course assuming that you chose the right bank (hello Rural Bank of Parañaque?). I once wrote about a Chinese businessman who lived on his P50 million placed in a time deposit account rolled over regularly. He enjoyed it so much that he believed renting a house for P85,000 a month in a posh Quezon City subdivision was better than buying his own home, because doing so would reduce his stash of cash. In the US, investors maximize time deposits (more commonly known as certificates of deposits) by using a strategy called “laddering.” This simply means spreading your money in CDs with different maturity dates, so that you get regular income from them. By doing this, you make sure that you don’t have to withdraw from your time deposits prematurely and suffer from the steep penalties. I made a few calls to the top three local banks and one thrift bank and here are their time deposit rates: P10,000-below P50,000 BPI –- 2.25% (30 days) -- 2.625% (90 days) BDO –- 1.875% (30 days) -– 2.75% (180 days) -– 2.875% (360 days) Metrobank –- 1.25% (30 days) –- 1.75% (90 days) –- 2% (180 to 364 days) PSBank –- 0.5% (30 days) –- 0.5% (90 days) P50,000-below P100,000 BPI –- 2.5% (30 days) –- 2.75% (90 days) BDO –- 2.25% (30 days) -– 3.25% (180 days) -– 3.375% (360 days) Metrobank – 1.5% (30 days) –- 2% (90 days) – 2.25% (180 days to 3.64%) PSBank –- 1% (30 days to 90 days) P100,000-below P500,000 PSBank –- 3.5% (30 days) –- 2.75% (90 days) BPI -– 2.625% (30 days) -– 2.875% (90 days) BDO –- 2.5% (30 days) –- 3.25% (180 days) -– 3.375% (360 days) Metrobank -- 2% (30 days) –- 2.5% (90 days) -– 2.75% (180 days to 364 days) P500,000 to below P1 million PSBank –- 3.75% (30 days) -– 3% (90 days) BPI –- 2.75% (30 days) -– 3% (90 days) BDO –- 2.5% (30 days) -– 3.25% (180 days) –- 3.375% (360 days) Metrobank –- 2.25% (30 days) –- 2.75% (90 days) –- 3% (180 days to 360 days) P1 million to below P5 million PSbank –- 4% (30 days) –- 3.25% (90 days) BDO –- 3.25% to 3.5% (30 days) -– 3.625% to 3.75% (180 days) –- 3.75% to 4% (360 days) BPI –- 2.875% (30 days) -– 3.125% (90 days) Metrobank -– 2.75% (30 days) –- 3.25% (90 days) –- 3.75% (180 days to 360 days) Some interesting revelations:
  1. It pays to shop around for the best rates.
  2. Some banks significantly rewards bulk deposits. Note that BPI has the best rates for deposits in the lower brackets but towards the half-a-million-peso level, its rates are taken over by PSBank and BDO.
Computing what you will get in interest Interest rates are annualized. To compute what you will get in interest, use this formula: Interest = (principal x rate x days) / 360 For example: P16,666 = (P5 million x .04 x 30) / 360 That’s the amount you will get if you put your P5 million in PSBank for 30 days at 4% interest. That’s about P200,000 for a one-year placement with simple interest. Remember, however, that earnings from time deposits are taxed with a 20% withholding tax. Are your savings safe? Time deposits are covered by the Philippine Deposit Insurance Corp. up to P250,000 and are thus more or less savings instruments for the ultra-conservative. However, there are also risks involved and these are mostly a result of how you choose your bank. How? Interest rates as of now are market-driven. That means that if I were a bank and I really want your deposits, I would try to best all my competitors and give you the highest rate in the market. To this end, competition among banks is good for depositors. However, some lesser-known banks, knowing their Waterloo, attract deposits by offering higher rates. You, the depositor, then have to make a personal decision whether you would accept the higher risk to get the higher return on your money from a bank with a not-so-stellar track record, management structure or business outlook. In fact, time and again, banks that have been known to close shop because of liquidity problems have offered abnormally high interest rates right before declaring a bank holiday. In MoneySmarts, readers have often pointed out that rural banks give much higher time deposit rates than the big commercial banks. That’s true. Some gave out as high as 18% or 20%, and now you know which banks those were. Most of these banks are now closed. So choose your bank well. Disclosure: MoneySmarts' husband works for PSBank, but has not in any way influenced this article.

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This page contains a single entry by published on March 20, 2009 2:01 PM.

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