Register now or log in to join your professional community.
I agree with Noman
"Interest bearing current account" – bank product which is providing interest accrual on current account daily balances of corporate clients using different types of interest rates such as:
Fixed interest rate means accrual of the “fixed” interest irrespective of the amount of account balance.
Floating interest rate means accrual of the "floating" interest which varies daily depending on interbank bid rates floating.
Combined interest rate means accrual of the "combined" interest which consists of “floating” and fixed interest rates.
Threshold and Tiered interest rates mean accrual of “fixed” interest depending on amount of account balance (the higher account balance amount is, the higher interest rate is applied).
Bank uses an individual approach to each client upon defining interest rate.
"Interest bearing current account" of OTP Bank stands for:
Interest-bearing bank accounts are accounts at banks that pay interest to the account holder. When an individual deposits money at a bank, the bank is essentially borrowing money. Just like any other loan, the bank pays interest on the money saved. Banks can then lend money to other people at higher interest rates to earn profit.
Function
Interest bearing accounts function as a way for banks to attract capital and gain profits. For instance, if one bank offers interest rates of2% on standard savings accounts and a bank across the street offers3%, few savers are likely to open accounts at the bank with the lower rate. If the bank with the lower rate raised its rate above3% however, it would likely attract more customers.
Types
Traditional savings accounts are a typical type of interest-bearing bank account, although any type of financial account at a bank that pays interest can be considered an interest-bearing account. For instance, some checking accounts pay interest to the account holder. Checking account interest rates are usually lower than savings account rates. Certificate of deposit (CD) accounts are another type of interest-bearing account where the saver commits funds for a predetermined amount of time in exchange for a higher interest rate.
Benefits
Interest-bearing bank accounts can be beneficial to individuals since they provide a safe place for money that earn a return. Banks that are members of the Federal Deposit Insurance Corporation (FDIC) have insurance for savings account deposits up to $250,000, meaning lost funds will be paid for by the government if the bank is unable to pay for some reason. High interest savings accounts and CDs can earn respectable interest rates with almost no risk.
Drawbacks
Interest-bearing accounts typically have less potential upside than other investments. Risky investments like stocks and mutual funds can potentially earn10% or more in short periods of time. While equity investments can go down in value, on average stocks are often considered a better long term investment than keeping money in interest-bearing accounts at banks. Interest-bearing accounts may also be subject to various fees and limitations.
Considerations
Many banks offer online savings accounts that may pay higher interest than typical savings accounts at brick and mortar banks. Online accounts can be linked to checking accounts, making it easy to transfer funds between the two.
Interest is basically the return on your investment. The bank periodcally pays interest to the account holder (be it monthly, quarterly, half yearly etc..). So an account (usually a savings account) is an interest bearing account (as opposed to a current account where the bank pays no interest) where the bank is liable to pay return to the depositor.
As per Shariate, paying/receiving of interest is not allowed.
But commercial banks pay or receive interest.
Alternatively, instead of interest , banks allow benefits to customers in some other form like giving of prizes under schemes.This is to comply with Shariate.The former accounts are interest bearing accounts.The latter accounts are non-interest bearing accounts.
I presume all the accounts in the Islamic banks are non interest -bearing.
Well explained by experts, i agree with them. Thanks
