What alternatives do you have if you have extra money which you won’t need in the near future and which you want to place in a safe investment?
Well, the easiest choice is to put it in a bank’s savings account. A savings account is highly liquid — meaning you can withdraw your money anytime you want. It is also safe because deposits up to P250,000 are covered by the Philippine Deposit Insurance Corporation.
If you want higher interest rate than a savings account, you may opt for a time deposit. Here you park your money for a certain period of time and, in return, the bank offers you an interest rate relatively higher than what your regular savings account will get. Like a savings account, time deposits are covered by the PDIC up to P250,000 per depositor.
Now, what if you still want a higher interest rate but are not willing to take additional risk? That’s when you can try investing in Special Deposit Accounts or SDAs.
What are Special Deposit Accounts (SDA)?
SDAs are short-term placements offered by the Bangko Sentral ng Pilipinas (BSP) to local banks. It is a mechanism used by the BSP to manage liquidity in the market. Since these placements are backed by the country’s central bank, SDAs are considered a safe and virtually risk-free investment. SDAs have short-term maturities, usually within a month.
How to invest in SDAs?
Visit a branch of your bank and inquire how you can make an SDA placement. Most of the branch staff know about its existence but in case they don’t have any idea, contact directly the Trust and Investment Management Division of the bank.
Normally, the only things required of you are your IDs, the application form which the bank will provide, an account with the bank that will serve as your settlement account, and your investment money, of course.
What is the minimum amount needed to invest in SDAs?
This varies per bank, so it’s better to ask them directly.
Based on what we know, the minimum amount needed to make an SDA placement in Banco de oro (BDO), Security Bank and Hong Kong and Shanghai Bank (HSBC) is P1 million.
In Chinabank, the minimum is P5 million.
In UnionBank, P10 million.
The lowest we know is Bank of the Philippine Islands (BPI) where the minimum is P100,000.
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