If you want your savings to earn more than a regular account pays, but you do not want the ups and downs of the stock market, a time deposit is one of the simplest tools available.
You agree to leave a fixed amount with a bank for a fixed period, and the bank pays you a fixed rate in return.
This guide explains what a time deposit means, what rates look like in the Philippines, and how to work out exactly how much you will earn.
What A Time Deposit Means
A time deposit is a bank deposit that you commit for a set term, such as six months, one year, or five years.
In exchange for that commitment, the bank usually pays a higher interest rate than it does on a regular savings account. The bank can plan around your money, and you get a predictable return.
Other names you may see include term deposit or fixed deposit.
They all describe the same idea: your money stays put until the maturity date. When the term ends, you can withdraw the principal and interest, or roll them into a new time deposit.
Key Features To Know
- Fixed term. Common terms run from a few months up to five years. Longer terms often pay more.
- Fixed rate. The rate is set when you open the deposit, so a later drop in market rates does not affect you.
- Deposit insurance. Deposits in banks that are members of the Philippine Deposit Insurance Corporation are insured up to ₱1 million per depositor per bank.
- Maturity choices. At maturity you can usually withdraw everything, take only the interest, or renew for another term.
- Limited access. Withdrawing before maturity usually means losing some or all of the interest, and some banks charge a fee. Read the pre-termination terms first.
What Rates Look Like
Time deposit rates vary by bank, term, and amount, and they change with the market and with promotions.
Digital and rural banks often advertise higher rates than large traditional banks, so it pays to compare.
Always check whether a headline rate is a promotion with an end date, and whether it applies to your chosen term.
As an example, Salmon Bank’s time deposit page advertises earnings from 6% per year and a promotional rate valid until November 30, 2026. It accepts amounts from ₱5,000 to ₱50,000,000 and offers terms of six months, nine months, and one to five years, with PDIC coverage up to ₱1 million per depositor. The page does not list a rate for each term, so confirm the exact rate for your term before you commit.
How To Calculate Your Earnings
For a deposit that pays simple interest at maturity, the formula is short:
Total Interest = Principal × Annual Rate × (Days ÷ 365) — Example: ₱10,000 × 0.05 × (90 ÷ 365) = ₱123.29 earned over 90 days.
Follow these steps:
- Multiply your principal by the annual rate to get one year of interest.
- Multiply that by the fraction of the year you keep the deposit. For example, six months is 6/12.
- Subtract the final tax, which is 20% of the interest, to get your net earnings.
Banks may count a year as 360 or 365 days, so the exact figure can differ slightly from your estimate. Ask the bank which method it uses.
Related: Salmon Credit Line Philippines: How 62 Days Free Works
A Worked Example
The table below uses a ₱100,000 deposit with sample rates, not real offers. Interest is paid out, not compounded.
| Term | Sample rate | Gross interest | 20% tax | Net interest |
| 6 months | 5% per year | ₱2,500 | ₱500 | ₱2,000 |
| 1 year | 6% per year | ₱6,000 | ₱1,200 | ₱4,800 |
| 3 years | 6.5% per year | ₱19,500 | ₱3,900 | ₱15,600 |
If a bank compounds your interest or lets you reinvest at maturity, your total can be a little higher, because later interest is earned on a larger balance.
Don’t Forget The Tax
Interest from bank deposits, including time deposits, is subject to a 20% final withholding tax, and the bank deducts it for you. Under the Capital Markets Efficiency Promotion Act, this flat rate replaced the old system, which exempted peso deposits held for more than five years and charged lower rates on shorter terms.
Deposits opened before the change keep their original tax treatment until maturity. Always compare rates on a net basis, since the tax applies to everyone.
Time Deposit Versus Other Options
A time deposit suits money you will not need for a while and want to keep safe.
It is not the best place for your emergency fund, since access is limited.
A regular savings account gives flexibility but lower rates, while government-linked programs and funds may offer higher returns with different rules on access and risk.
If you are weighing the alternatives, Tech Patrol’s look at the Pag-IBIG MP2 dividend rate is a useful comparison, since MP2 also asks you to leave money untouched for years.
Tips Before You Open One
- Keep an emergency fund separate, so you never need to break the deposit early.
- Consider laddering: split your money across different terms so some matures every year.
- Confirm the rate, term, maturity instructions, and pre-termination penalty in writing.
- Check that the bank is PDIC-insured, and keep each bank’s total below ₱1 million for full coverage.
- Decide in advance whether your money will roll over or be paid out at maturity.
- Compare the net return, after tax, rather than the headline rate, so you can fairly judge it against other options.
- Set a calendar reminder for the maturity date, since some banks automatically renew the deposit if you do nothing.
The Bottom Line
A time deposit trades flexibility for certainty. Know the term, the rate, and the tax, and use the simple formula above to estimate your net earnings before you commit. Compare at least a few banks, and treat every advertised rate as a starting point to confirm, not a final number.
