What is certificate of deposit(LTNCD)? Compare certificates of deposit and passbook

Comparison of certificates of deposit and passbook helps customers easily choose the channel with the most profitable investment and suitable for the purpose of using money in the future.

You are wondering how to use your free money to be able to both profit and ensure benefits? Currently, certificates of deposit and passbook are both the most interested capital mobilization channels today. With interest rates of more than 5% / year, what’s the difference between certificates of deposit? Let’s find out through this article right now !!

What is certificate of deposit?

Certificate of deposit (Certificate of deposit – Long term negotiable certificate of deposit or LTNCD) is a valuable paper issued by a bank to mobilize capital from other organizations and individuals. In other words it is a valuable paper similar to a passbook, issued by a bank certifying a client’s ownership over a time deposit at the bank.


Certificates of deposit were first applied in the US in 1961, and then circulated in the UK. Owners of this certificate will enjoy interest rates and have the right to give, donate and transfer according to the provisions of law and the issuer.

Types of deposit certificates

Certificates of deposit have three main types including:

  • Registered deposit certificate: A valuable paper issued in the form of a certificate or book recording with the name of the owner.
  • Anonymous certificates of deposit: are valuable papers issued in the form of certificates without the name of the owner. Anonymous Certificate of Deposit belongs to the holder of the deposit certificate.
  • Book of deposit certificate: A non-transferable certificate of deposit, sold at par value and with interest on the maturity date.

Advantages and disadvantages of certificate of deposit

Certificate of deposit also has the following specific advantages and disadvantages:

Advantages of certificate of deposit

  • Certificates of deposit are a risk-free investment asset guaranteed by major financial institutions.
  • Both principal and interest are guaranteed the entire time you deposit money as a form of passbook.
  • Certificates of deposit usually have a higher interest rate than regular passbook accounts with the same term.
  • Buyers can “pledge”, transfer or sell valuable papers for a very flexible loan.

Disadvantages of certificate of deposit

  • Buyer is not required to pay early.
  • Liquidity is not high.
  • Low interest rates for long-term investments.

In particular, the buyer should know the lending interest rate if the bank stipulates that it can only withdraw by pledge of valuable papers to re-borrow money or the interest rate to pay early if it is allowed to pay in advance.

Therefore, although the interest rate is higher than the same term passbook interest rate, it is advisable that the buyer needs to carefully calculate, only buy when all plans for the use of his capital have been made.

Purpose of issuing certificates of deposit (CDs)

Known as a profitable investment channel, certificates of deposit are chosen by many people because of their high interest rates. But not many people are interested in issuing certificates of deposit.

In the current volatile global financial market, most will choose short terms to easily convert investment methods. Thus, it can be seen that the purpose of issuing certificates of deposit is completely derived from the long-term capital needs. High interest rates offered by banks aim to stimulate demand and encourage investors to choose to buy CD instead of saving at the bank.


In addition, personal income tax and procedures are also the reasons why banks issue certificates of deposit. According to current regulations, banks will be autonomous in CD issuance and CD investors will not have to pay tax. Meanwhile, in order to issue bonds, banks are required to prepare issuance documents and have the approval of both the State Bank and the State Securities Commission, especially when buying bonds, investors will have to subject to personal income tax.

Another reason is that many banks are aiming to comply with Basel II. Accordingly, besides credit risks, banks must control market risks and operational risks. If we follow the new standard framework, the CAR of Philippines banks will surely be much lower than the current level. Thus, the capital increase is the only way to achieve the new standard of capital adequacy as CD is included in the tier II capital of the bank.

See also: What is liquidity? Basic information about liquidity

Benefits of participating in certificates of deposit

Certificate of deposit is a safe, high interest, easily transferable form of deposit that will help customers feel secure and provide flexible funding sources for future plans. Outstanding benefits when buying certificates of deposit such as:

  • Earn interest on the purchased amount: Similar to passbook, interest will be paid on the monthly deposit amount. However, with certificates of long-term deposit, customers will enjoy higher interest rates than normal passbook.
  • Transferred: If the customer needs to use the money urgently or does not want to own that certificate of deposit, it is possible to transfer his deposit certificate to another person, the transfer price is agreed by both parties. pros. At that time, the bank will act as an intermediary to confirm the ownership of that certificate.
  • To be given, gifted, donated, inherited, authorized to others according to the provisions of law and the issuing organization: Customers can completely give or give back to children, parents, relatives … No more complicated as inheritance, need inheritance, have a lawyer, have witnesses … For certificates of long-term deposit, customers only need to confirm the bank to give, give, authorize others. The bank will support simple and quick donation or donation procedures.

Interest rate for certificates of deposit at some banks

Recently, a series of commercial banks have been racing to issue certificates of deposit with the most attractive interest rates, even called “super interest rates” for long periods by many people. Please refer to the deposit certificate interest rates of some typical banks below to make the most effective investment options:


  • Certificates of deposit mainly focus on long terms from 16 – 60 months.
  • Banks in the system currently issue certificates of deposit with interest rates from 3% – 6%.

Compare certificates of deposit and passbook

A passbook is a book that certifies the money you deposit at the bank – where you choose to open a passbook account. A passbook is not a valuable paper, it is just a certificate of ownership of an asset, but the asset is the amount deposited at the bank recorded in the passbook.

Table comparing the characteristics of deposit certificates and passbooks:

Passbook Certificates of deposit


Depending on each term and each bank, the current highest passbook interest rate is about 2%. Compared to passbook deposit, certificates of deposit usually have a higher and more stable interest rate, depending on the long or medium term, the highest interest rate of deposit certificates is also close to 6%.


Normally, deposit terms are 1 month, 2 months, 3 months, 6 months, 12 months, 24 months … Certificate of deposit with longer term; It can be 3-5 years … depending on the bank and the issuance.


Passbook deposit is a channel with high liquidity, customers can withdraw money when due and can also withdraw before maturity, but must bear very low demand interest rates. Theoretically, customers who buy certificates of deposit can not withdraw before maturity. save.

Should you invest in certificates of deposit or savings account passbook?

Each investment channel has different advantages and disadvantages, so choosing which channel, customers must consider carefully based on profitable investment needs, future spending situation to choose which channel, which term. and which bank for the best.

At present, the interest rate of certificates of deposit is higher than the interest rate on passbook, but it has a longer term and is usually not able to withdraw money before the maturity date like a regular passbook. So this channel will be more suitable for customers who have idle financial accounts and are temporarily idle for a fixed period of time.

If a customer buys certificates of deposit but needs urgent capital but is not due yet, he / she can “pledge” valuable papers at the bank to borrow but the loan interest rate will be higher than the interest rate for certificates of deposit that customers that buy.

Do not put eggs together in one basket is the best advice for investors, so take advantage of the advantages of these two channels and divide your investment into 2 parts:

– An investment in certificates of deposit that both receives high interest and keeps a fixed amount of money for future goals;

– A part of passbook with a suitable term, both enjoying interest rates and easily using capital when needed.

If you have idle money and do not have any plans in the future, buying certificates of deposit is a good choice to enjoy the highest interest rates. However, before choosing, you need to research carefully to bring the initiative and maximize your benefits.


Security bank LTNCD


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