Time deposits enable the bank to invest the funds in higher-earning financial products.
In some countries, including the United States, time deposits are not subject to the banks’ reserve requirements, on the basis that the funds cannot be withdrawn at short notice.
Generally, the longer the term and the larger the deposit amount the higher the interest rate that will be offered.
[1] The interest paid on a time deposit tends to be higher than on an at-call savings account, but tends to be lower than that of riskier products such as stocks or bonds.
The money deposited normally can be withdrawn before maturity, but a significant penalty will normally be payable.