In the context of higher interest rates, Certificates of Fixed Deposits (CDPs) offered by the National Financial System became popular last year as a better opportunity for savers to invest their money to generate returns.
According to data from the Central Bank of Costa Rica (BCCR), the balances of time deposit certificates within the national financial system, both in colons and dollars, have increased significantly from May last year for the national currency and from December last year. Foreigner.
In the case of Colon, the balance in April 2023 increased by 19.42%, from ¢7.69 trillion to ¢9.19 trillion, compared to the same month last year. From last May, when interest rates began to rise as a result of the monetary policy rate adjustment, the increase in balances began to accelerate.
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Meanwhile, for the balance in dollar terms, the increase was 6.02% as compared to April 2022 as the figure rose from $6,016 million to $6,379 in which it closed for the same month of 2023. Getting the highest growth was started in December.
In a fixed deposit, the saver agrees with the financial entity on an amount in which he wishes to invest his money, sets a specific term, and receives an interest rate in return. These three variables can vary depending on the mediator chosen by the individual.
Once all the conditions are met, the client deposits the agreed amount, and when the agreed period is over, the intermediary returns the money plus interest. Some institutions also offer the possibility of paying returns monthly or at the end of the agreement.
long terms
The beauty of these investment instruments is that they can be customized for a fixed tenure, with the longer the terms, the better the return the saver gets for his money. In Costa Rica, it seems that the choice is in favor of getting better returns in the short term before getting lost.
Sheila Villalobos, Banco Nacional’s Director of Deposit Products and Services, confirmed that the term investments showing growth in this financial entity are between seven and 12 months, with the colon being the most used currency.
“Given the rise in passive (savings) rates, customers feel more secure and look for one-year terms. They are gaining confidence in the market, they are clients with extensive investment knowledge and they relate the trend to the behavior of inflation to determine the duration of the investment”, commented Villalobos.
Banco Nacional’s Director of Deposit Products and Services said that, in addition to the increase in interest rates, digital banking has also been a determining factor in the increase in the use of these instruments, as customers can make their investments from their cell phones. Or computer without coming to the office.
On the other hand, Lariza Martinez, manager of deposit products at Scotiabank, explained that in the financial entity they see a greater preference for investing in the dollar, which has gained ground in comparison with the local currency with a tendency to hold long-term investments, i.e. , more than a year.
According to Martinez, term certificates are a low-risk product, so customers who are averse to diversification while investing their money prefer these instruments, as they get a fixed return on which they have already invested. Agreed.
Meanwhile, the Bank of Costa Rica (BCR) indicated that the movement of certificates in the Colonies remains stable, with an upward trend during 2022, while the downward trend in foreign exchange is mainly due to the encouragement of better yields in the Colonies. Reason has been entered.
In that institution, certificates in the national currency are the ones that show the greatest growth, with savers preferring to hold their money over longer periods, as the preferred ones are six months, 300 days, one year and 1,080 days, i.e. About three years. In dollars they prefer terms of between six months and one year.
How to request it?
Although the terms of fixed deposit certificates vary depending on the entity in which savers decide to invest their money, the process of formalizing such an instrument can be quite simple, and can be very similar across intermediaries. .
Institutions such as BCR, BAC, Scotiabank, National Bank, among others, offer the possibility of making dematerialized term deposits through their online banking applications, without the need for paper or the need to visit an office.
Another option is to visit the offices of the financial institutions to agree on the terms of your term deposit. In this method, when you complete the process they will give you a printed security title, which acts as a backup of the contribution that the customer deposits in the bank as an investment.
Is it still a good time?
For former BCR manager Carlos Fernandez, it is still a good time for savers who want to agree on a term deposit in a financial institution, as rates are still high, despite the fact that colon rates are falling. Are. And the dollar is stabilizing.
“Given the possible fall in interest rates in the colon and the dollar in the coming months, investors should keep their funds in the long term and for a good tenure to take advantage of the good interest rates,” Fernandez said.
The former BCR manager said if savers invest fresh funds or renew in the short term, it is possible that the interest rate for the next maturity will be lower. “(People) still need to take advantage of the high, long-term interest rates,” he said.
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The net monthly negotiated passive rate (TPN) in Cologne for all entities of the national financial system averaged 7.28% for April, compared to 8.54% for January. Meanwhile, the monthly net TPN in dollars averaged 3.27% for the same month.
This indicator is a weighted average of the returns that these institutions offer to their customers for their fixed deposits over a specified period, in this case per month. In the general panorama, rates have risen faster in the colon than in the dollar.
