Definition:

Interest Bearing Deposits are bank deposits that earn interest over time. These deposits can be in the form of savings accounts, money market accounts, or certificates of deposit (CDs), where the bank pays the depositor a specified interest rate for the use of their funds.

Examples

Examples of interest bearing deposits include savings accounts, money market accounts, and certificates of deposit (CDs).

Formula:

Interest Earned = Principal Amount x Interest Rate x Time Period

How to use the metric:

Interest bearing deposits are used to assess the potential earnings from deposited funds over a period. They help individuals and businesses determine the best savings or investment options based on the interest rates offered by financial institutions.

Limitations:

Interest rates on these deposits can fluctuate, affecting the predictability of earnings. Additionally, some accounts may have restrictions, such as minimum balance requirements or penalties for early withdrawal, which can limit accessibility to funds.

Applies to:

Interest bearing deposits are most applicable in the banking and financial services industries, where they are used as a tool for savings and investment.

Doesn't apply to:

Industries that do not typically engage in financial savings or investment activities, such as manufacturing or agriculture, may not find interest bearing deposits directly applicable to their core operations.

Summary:

Interest bearing deposits are financial products that allow depositors to earn interest on their funds over time. They are commonly used in the banking industry and provide a way for individuals and businesses to grow their savings. However, they come with limitations such as fluctuating interest rates and potential restrictions on fund access.