Is There a Difference Between a Deposit and a Savings Account?

It is easy to confuse the terms deposit and savings account, as they sound similar and are both used to build up savings. In practice, however, the two terms often refer to different types of savings products, which mainly differ in terms of their duration, interest rates and access to funds.

In this article, we explore the differences between deposits and savings accounts based on their key features, the types of deposit products offered by iBank, and which option may be more suitable for your financial goals.

Deposits and Savings Accounts – Key Differences

Deposits and savings accounts differ in several key aspects relating to how you manage your funds and the interest you earn. Explore the differences below to determine which product best suits your needs and saving habits.

Adding Funds

With a fixed-term deposit, the conditions for adding funds depend on the specific product. Some deposits allow additional contributions, while others do not.

With an instant-access savings account or an open-ended deposit, you can generally add funds multiple times, subject to the terms and conditions of the relevant account. This is a convenient option for people who prefer to build up their savings gradually rather than deposit a large amount upfront.

Withdrawals

With a fixed-term deposit, withdrawing funds before the agreed maturity date involves early termination under the conditions specified for that deposit. Early termination may result in the interest being recalculated at a lower rate set by the Bank.

With an open-ended savings account, access to funds is generally more flexible, while withdrawal and interest-accrual conditions depend on the specific product. This flexibility makes savings accounts a preferred option for keeping emergency funds that may need to be accessed quickly.

Term

A fixed-term deposit is opened for a specified period, usually between 1 and 36 months. The agreement sets a specific maturity date, on which the funds and accrued interest become available in accordance with the Bank's terms and conditions. An open-ended savings account has no fixed maturity date, making it a convenient choice for people who do not wish to tie up their money for a specific period.

For certain deposit products, if you do not withdraw your funds or amend the agreement on the maturity date, the Bank may automatically renew the deposit for a new term at the interest rates applicable at that time.

Interest Rates

Interest rates on fixed-term deposits are generally higher than those on savings accounts because the Bank can rely on the funds remaining deposited for the entire agreed term. Depending on the product, interest may be calculated as simple interest on the principal amount, while in other cases it is periodically added to the balance through interest capitalisation. This increases the amount on which future interest is calculated and may result in higher overall returns.

In addition to the term, the interest rate on a deposit also depends on the currency, the amount deposited and the interest payment method – upfront, monthly or at the end of the term. For open-ended savings accounts, the interest rate is determined in accordance with the Bank's current Interest Rate Bulletin, whereas the rate on a fixed-term deposit may remain fixed and predictable throughout the agreed term.

Types of Deposits and Savings Accounts

iBank offers a variety of deposit products designed to meet different needs in terms of duration, amounts and interest payment options. Before submitting a deposit application, it is advisable to check the opening conditions for your chosen product, including the minimum deposit amount and the available currency.

Types of deposits offered by iBank:

• Standard Deposits - Promotional Deposit, Online Deposit, Start Deposit and Standard Deposit.
• Long-Term Deposits - Long-Term Deposit with Upfront Interest Payment.
• Deposits with Upfront Interest Payment - VIP Deposit with Upfront Interest Payment.

If you are looking for a more flexible savings option with easier access to your funds, we recommend contacting an iBank representative to discuss the currently available options.

Unlike structured deposits, where returns depend on the performance of an underlying asset, fixed-rate term deposits offer a predetermined interest rate for the agreed period. The choice between a savings account and a fixed-term deposit mainly depends on the amount you have available and your savings goals.

When Should You Choose a Deposit and When a Savings Account?

If you have surplus funds that you will not need in the coming months, a fixed-term deposit generally offers a higher return and is a suitable option for long-term savings. Customers looking for higher deposit interest rates typically choose longer deposit terms and larger initial amounts, as banks reward customers for committing their funds for longer periods.

If you expect to use your money in instalments throughout the year or prefer more flexible access to your funds, an open-ended savings account may be a better choice. It combines the opportunity to earn interest with greater flexibility in accessing your money. This means your funds remain available for unexpected expenses rather than being tied up for a fixed period under specific withdrawal conditions.

Many customers choose to combine both products – keeping part of their savings in a fixed-term deposit while holding the rest in a savings account for everyday needs. This approach can also be useful when saving through a deposit for pensioners or a children's deposit opened by a parent or legal guardian on behalf of a minor, as it combines security with accessibility.

When comparing deposit products, it is important to look beyond the advertised interest rate and consider the conditions for adding funds, making withdrawals and terminating the deposit early. These details can have a significant impact on your final return.

Frequently Asked Questions

What documents are required to open a deposit?

The required documents and the account-opening procedure depend on the selected deposit product and the application method. Depending on the amount deposited, banks may also require a declaration of the source of funds.

Are there any fees associated with deposits?

Some deposit products do not incur bank fees for opening and maintaining the account, while others may involve such fees, particularly in the event of early termination.

To check the exact fees applicable to your deposit, we recommend consulting the Bank's current Tariff of Fees and Commissions so that you are aware of all the conditions in advance.

How does deposit protection work?

In Bulgaria, deposits are protected by the Bulgarian Deposit Insurance Fund (BDIF), which guarantees deposits of up to EUR 100,000 per depositor per bank.

This protection applies to both fixed-term deposits and open-ended deposits and savings accounts.