The main objective of this article is to explain how you can invest in a fixed deposit account and how much you can make from it as well as how it is calculated using Vbank, Nigeria’s foremost virtual bank as case study.
To start, a fixed deposit is an investment with a specific amount invested at an agreed interest rate and tenor. All banks in Nigeria offer this investment opportunity, however, the rates you get when you invest in one bank may differ from what you get from another.
Features of a typical fixed deposit investment
The investment period (tenor) is a minimum of 30 days and a maximum of 360 days.
The minimum opening balance for this investment in major banks in the country starts from N50,000 and above while there is no specific amount to open a fixed deposit account in Vbank.
It might interest you to know that with a minimum amount as low as N1,000 you can open a fixed deposit account and to open a V account is very simple and easy.
If the investment is terminated before maturity the total accrued interest not earned will be forfeited. Meaning only the portion of the interest earned in the period that your money was in the bank is what will be paid to you.
The investment amount can be terminated at the customer’s discretion.
The interest paid to the depositor is subject to Withholding tax (WHT), which is usually deducted from the interest earned.
Advantages of Fixed Deposit Investment
- Provides a higher rate compared to a Savings deposit.
- Guaranteed returns – The returns from this investment is guaranteed.
- Highly liquid – The money can be terminated to fund short term liquidity needs.
- Flexible in nature – An individual can have several fixed deposit investments with different banks and at different terms.
How much you get
Fixed deposit rates for most Nigerian banks stood between 7 percent and 12 percent depending on how much you are investing.
But in the case of Vbank, the bank offered a 14 percent interest rate, higher than the interest rates offered by major banks in the country. In addition, Vbank’s rate is higher than the inflation rate which presently stood at 13.22 percent, a strong indication that your investment would not be eroded.
For example, to get up to 12% you might have to invest in millions of naira in major banks in the country, but reverse is the case in Vbank
How to Calculate Interest on Fixed Deposit
Fixed deposit investments are usually calculated using simple interest, which means the key elements to take note of include; Principal, tenor, and rate.
If Mr. Adebowale invests N1,000,000 in fixed deposit with Vbank for a 30-day tenor and the bank offers 14 percent, how much will he make after 30 days?
Principal – N1,000,000
Rate – 14%
Tenor – 30 days
Step 1: Calculate interest to be earned
= 1,000,000 x 0.14 x 30/365 = 11,506.85.
The interest on this investment will be N11,506.85.
Step 2: Calculate the interest net of withholding tax – This is because banks charge 10% WHT on interest.
WHT = 10% (0.1) x 11,506.85 = 1,150.69
Net interest = 11,506.85-1,150.69= 10,356.16
Step 3: Calculate total amount to be earned at maturity
Total amount at maturity = N1,000,000 (Principal) + N10,356.16 (Net interest) = 1,010,356.16
If you plan to invest in a fixed deposit, it will be wise to contact between 3-5 banks and find out which bank offers the most competitive rate before placing your money.
Why you should open a V Account
Many investors are not aware that they should consider the inflation rate and interest rates before taking a Fixed Deposit. When an investor invests his assets in a stock market, the value of his investments diminishes over time to the extent of the rate of inflation.
With inflation rates increasing, you’ll lose more investments than actually saving. When this happens, a fixed deposit offers a safer and return-guaranteed investment regardless of whether the market prices shoot up or not, giving you peace of mind.
Fixed deposits are low in risk with a guaranteed return on investment. However, you must consider the duration of the investment and the penalty charges that come with it.
You should also keep in mind that building your savings by investment is better than letting it gather dust in a regular savings account. When you compare the interest rates of fixed deposit, make sure to watch out for these non-standard terms and conditions at all times!
What is V bank account?
The V Mobile Application is your access to all things banking on the go. Opening a Vbank account is easy and can be completed within 2 minutes. The application enables you to create an account either by using an existing BVN number or an existing bank account number. … Let us get you started on opening your V Account.
Features: – Open you salary, savings or current account – Categorize and create smart budgets for your expenses – Send money to 3rd parties for cash .
So, join the digital banking revolution by opening an account with V today and get fantastic interests on your investment.
With a V Account, you can expect a streamlined digital and mobile banking experience, with ease of access to your accounts, swift and secure transfers, withdrawals and bill
Vbank is owned and powered by VFD Microfinance Bank, a Lagos-based financial services institution operating in the microfinance banking sector. The combined experience of its management spanned more than five decades and several banking and finance organizations, nationally.