Prolongation of bank deposits - extension of the term of the agreement after its validity period ends. The extension is usually carried out for the same period and with the same interest rates for a particular deposit in effect at the time of extension. The main advantage of extending the deposit for the client is saving time. In most cases, the bank carries out the extension automatically, and the client’s presence is not required. However, not all deposits can be extended; this option is specified in advance in the agreement when opening a deposit account.
Types of extensions
The service is provided by the bank in two modes – automatic and manual.
In the first case
The bank independently extends the deposit for another term without the participation of the depositor. Moreover, in the future, the deposit amount is considered to be the main deposit plus the money accrued on interest. This happens if the client has not expressed a desire to close the deposit or withdraw interest. This is convenient for the depositor and for the bank, because time is not wasted on re-issuing the agreement.
Second option
will require the presence of a depositor. At the bank’s office, he must personally declare his decision to extend the contract, withdraw accrued interest or agree to their capitalization, that is, summing them up with the main deposit. This is beneficial to the client, since interest will then be calculated on the entire amount, taking into account profit.
Those clients who use a bank card and Mobile Bank can do without a visit to the office. On the personal page of the Sberbank Online service you can carry out all the necessary operations on your deposit.
You can also communicate your desire to extend the deposit term by telephone by calling the bank manager.
Advantages and disadvantages
The investor decides independently how to manage his money. A bank deposit has a low return, but at the same time minimal risks of losing money. If the budget allows you to continue investing and the banking direction is chosen, then it is worth considering the advantages and disadvantages of prolongation. Let's talk about the pros first.
pros
The main advantage is that this is an automated process, i.e. you do not have to contact a banking organization and sign additional agreements. It is enough to ask remote communication channels about the possibility of renewal and conditions and continue to earn bank interest.
Without auto-renewal, the money will go to a deposit account that does not generate profit. Accordingly, given the fact that it is not possible to contact the bank during this particular period, you may lose part of your profit. For example, the agreement ended in October, and to sign a new agreement, the investor will be able to contact the office only in November. Thus, you can miss out on interest for the month.
Minuses
Renewing the contract on an automatic basis assumes that on the day the deposit ends, you will make a decision on how to dispose of the earned profit. And if you don’t take back the interest, it will be capitalized into a new deposit. After that, it will be possible to withdraw the amount only at the “on demand” rate, which will lead to loss of profit. Although, if the contract provides for partial withdrawal, this will not affect the profitability.
Before expiration, we recommend that you contact the bank and find out how you can withdraw part of the money if you have plans to carry out such an operation. Some companies issue funds based on an application, which may take several weeks to process.
You should also review the renewal terms. Since the interest rate may be changed or an inconvenient validity period may be provided. Moreover, the product may simply be transferred to the archive, and the contract will not be renewed.
What interest will be lost?
Interest on the deposit is lost in case of early closure of the deposit. In this case, the investor receives only the principal amount. If on the expiration date the investor refuses to renew the contract, he will receive the entire amount with interest, but within a day he will lose this opportunity.
You may lose benefits even after the contract is automatically renewed. The fact is that Sberbank often (about once a quarter) updates the conditions for its products, and the interest on the deposit after prolongation may be lower. And the client is not always notified about this.
Also, the bank can extend the deposit without warning, even if at that time the product is no longer listed among its offers. Then he will simply extend the deposit “on demand” at a minimum interest rate.
What you need to know about pitfalls
To ensure that the extension does not result in a loss of nerves and money, it is necessary to adhere to the correct algorithm of actions. If the agreement does not provide for automatic renewal, you should:
- Withdraw your savings in full (along with interest) when the contract expires. For example, if the agreement specifies the date of receipt of money as September 10, this means that the money must be withdrawn on that day. The money, of course, will not disappear if the client cannot visit the bank on that day. But the bank will transfer them to a demand deposit and with each day that the money is on it, the value will depreciate.
- Check in advance whether the bank will have the required amount at the bank’s cash desk on the appointed day to withdraw the deposit in full. Usually you need to order the required amount of cash in advance, especially if we are talking about a large amount of money.
- Use a notarized power of attorney for another person if it is known that the investor himself cannot receive the money within the agreed period.
- Choose how to use the withdrawn funds. You can use them to realize the goal for which the funds were saved, or you can continue to save money in a new deposit under the same or different conditions.
If the contract provides for automatic renewal:
- Before the expiration of the contract, you should familiarize yourself with the current situation in the banking market. A lot can change during the year, and in the banking industry, several times a year. If the depositor has entered into an agreement with 7% per annum, after extending the deposit term the interest may drop to 4 - 5%. You should consider the offers of different banks and conclude an agreement that is beneficial for yourself;
- If the client is completely satisfied with the terms of the contract, then there should be no problems with the deposit. The deposit will automatically be renewed for a new term without the participation of the depositor. The accrued interest will be added to the principal amount (if the depositor does not withdraw it) and will also begin to work. If the client wants to withdraw interest, it is better to do this on the day the contract ends. Withdrawal of interest at any other time is considered early termination of the contract and entails all the ensuing consequences;
- Find out on the website of the banking organization or from bank employees whether the current tariff has been transferred to the archive. This happens often and threatens that the money will be transferred to a demand deposit, which provides for a minimum return;
- There is no need to wait for the bank to notify you that the deposit term is approaching or that the interest rate is changing. It is not profitable for the bank to do this. The client must independently control his finances.
No bank has the right to refuse a client to withdraw his personal savings: before the end of the contract, during or after.
Tariffs and costs
Interest rates depend on the deposit amount. Therefore, in the conditions for each product the values “from” and “to” are indicated. In addition, the client can choose the type of deposit:
- with the possibility of replenishment
(“Replenish”, rate from 5%, deposit amount – from 1000 rubles); - with the possibility of partial withdrawal and replenishment
(“Manage”, from 4.7%, from 30 thousand rubles). This product allows you to partially withdraw money without losing interest when rolling over; - without partial withdrawal and replenishment
, for a period of 1 month to 3 years (“Save”, up to 5.5%).
By choosing the type of deposit with the optimal rate and conditions beneficial to the client, you can protect yourself from unexpected changes in the rate after the extension of the deposit or in case of early withdrawal of part of the money.
How and under what conditions does the deposit prolongation take place?
There are several such conditions. In this part of the conversation we will analyze them in more detail.
1. The beginning of a new deposit term comes into force one day after the previous one ends.
If no other terms are specified in the contract, this rule will apply. Therefore, before you sign the contract, study it carefully.
2. The term for prolongation of the deposit is the same as the original one.
This condition applies in most cases. That is, if you entered into a contract for 2 years, it will automatically be extended for another 2 years. If the term differs from the original one, this is stipulated in a separate document.
3. The rate will not be changed during the entire period.
The deposit may be extended at the rate in effect on the date of extension, unless otherwise provided by the agreement. But most often, during the extension procedure, the rate changes. Therefore, you should clarify the information and be interested in new offers.
4. If you did not withdraw money in the previous period, % will be accrued on the entire deposit amount.
If the agreement expires and you have not withdrawn either the interest or the invested money, it means that the amount has increased. This is an example of capitalization, which was discussed just above.
5. The rate at which the deposit was opened changes to the rate in force on a specific date.
If the contract is extended, the interest rate that was in effect on the date of extension will remain in effect for the entire subsequent period.
Banking organizations are engaged in notifying clients about the status of their deposits only at the moment when they begin to lose their money. At all other times they are simply silent. Therefore, take an interest in the state of your affairs.
Is it possible to refuse an extension?
Not all types of deposits are accompanied by this service. Some products require contracts for only one term, after which you need to close the account and open a new one. Information about this should be clarified when opening a deposit.
Also, the deposit can be extended a limited number of times, after which you will have to open a new account and enter into a new agreement.
The bank may refuse to extend the deposit if, when concluding the agreement, the client indicated that he does not need this service. On the day of expiration, he can renew the contract without withdrawing money. But already on the second day the deposit will be frozen until requested by the client.
A renewal may be refused if it is not the depositor himself who contacts the bank, but his representative, but without a power of attorney certified by a notary.
If we talk about refusal of a service on the initiative of the investor himself, this must be done on the day the contract is concluded. The bank indicates that this service is optional. But the bank employee may not focus the client’s attention on this. And therefore, before executing the contract, you should carefully study all the conditions: interest rate, term, clause of agreement with the extension. Unnecessary services should be canceled immediately in the document.
Contract extension - what is it?
Translated from Latin, the word “prolongation” (prolongare) means “ extension ”. Depending on the area where this term is applied, its interpretation also depends.
The concept of prolongation is most often found in the field of contractual relations , but it can be found in medicine (see the end of this publication for more information) and in other industries.
Extension of the term of a contract is the most common use of the term “extension”.
An agreement is a special document that establishes a specific agreement between the parties to a transaction (commercial, legal, labor, etc.) and fixes the conditions for the implementation of this agreement.
The duration of the contract is one of the main points of the agreement of the parties and can be indicated with the exact date of completion of the contractual relationship or with wording about the possibility of extension.
There are 2 types of extension:
- Automatic. This procedure provides for a situation where the contract specifies the possibility of extension, and if after the expiration of the agreement neither party is against the extension, then the contract is extended for a new period. In this case, the extension is of an undeclared nature, i.e. No additional documents are required.
*clicking on the picture will open it full size in a new window.
An example of the wording of the automatic extension of the contract in a standard document is given above. - By expiration date. This type of extension is declarative and is secured by a separate agreement. The document specifies the wording on the extension of the contract for a certain period and indicates that all other clauses of the contract remain unchanged.
Sample of a typical add. agreements:
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*clicking on the picture will open it full size in a new window.
Let us further analyze special cases of contractual relations. Let's start, for example, with the extension of the contract for the supply of goods .
This option is often used in wholesale trade. If the supplier and buyer have no claims against each other, then it is beneficial for them to include in the contract a clause on its automatic extension.
Next, let's take a closer look at prolonging bank deposits, loans, rental agreements, as well as prolonged treatment methods in medicine.
What do you need to know?
Before signing a contract, you need to be safe in case of unforeseen misunderstandings and ask:
- in what mode the extension will be carried out - automatically or by application;
- will it be possible to refuse to prolong the deposit and how to do it;
- for how long the contract will be extended (it happens that the bank changes the term after the first period of the contract);
- is it possible to change the interest rate after prolongation of the deposit;
- number of deposit renewals.
Is it possible to refuse extension and how to do it - procedure
In this section we will look at how you can refuse the extension.
Let's look at the detailed procedure required for this.
Action 1. Contact the bank
If the bank automatically extends your deposit, but you do not want this, then you first need to seek advice. There are several options: come to the branch, call the hotline, or contact the manager online.
Usually, refusing to renew still requires the client to be present at the branch, but it is better to clarify in advance what you need to cancel by contacting the manager.
Action 2. Compose a statement
The bank will most likely ask you to draw up a statement stating that you do not want to continue holding funds under the previously agreed conditions.
A sample application will be provided to you by the specialist who will serve you.
Action 3. Break the cooperation agreement
After you write a statement, you need to terminate the cooperation agreement.
Since the agreement was extended for a new term and a new extension agreement was automatically concluded, a statement is needed to cancel its effect and declare your unwillingness to keep funds in the bank on the same terms.
Thus, you will confirm your reluctance to renew the agreement and withdraw your savings along with the capitalization of interest.
Action 4. Take the money
Now all that remains is to collect the money.
You can receive them at the cashier or transfer them to your account.
Watch this video to consolidate the material you have covered and learn how to earn money.
Procedure
Before visiting the bank, it is advisable to carefully study your agreement (you still need to take it with you) and insofar as it concerns the conditions for prolonging the deposit. If the service of automatic extension of the deposit is not specified, or the conditions are not satisfactory and it is better to change them, you need to go to the bank. You need to find out from the manager all the terms of the contract, find out all the details of capitalization of the deposit, the possibility and conditions of automatic renewal, and more profitable options. If in the application the client chooses the automatic renewal type, he will only have to sign the agreement and do not forget to pick up his copy of the agreement with the new terms.
Extension in Sberbank Online
Extending the deposit term online is possible for any deposit product. True, this is only theoretical, because renewal in the Sberbank Online personal account occurs automatically, if so provided for in the contract. Another thing is that it is convenient to track all changes in interest rates for this type of product, accrued profit, terms and other nuances.
If the agreement does not provide for automatic renewal, you can close the deposit online and open a new one. To do this, just go to the “Deposits” section, select a favorable interest rate, enter the deposit amount and indicate the account from which the money will be credited.
Loan extension
Extension of the loan term is a forced measure that allows the borrower to “stretch out” the repayment period of the loan taken from the bank if for some reason he cannot repay it on time.
The extension is not specified in the initial loan agreement; it is of a declarative nature . The client must independently contact the bank and write an application to extend the payment period. If the bank makes a positive decision, then an additional agreement will be drawn up between the bank and the client.
For the client, extending the loan is not economically profitable, since he is forced to pay interest for using the loan funds for a longer period than previously provided. As a rule, when prolonging a loan agreement, the bank increases the interest rate for the use of borrowed funds.
Features of automatic extension of deposits
If the depositor did not have time or did not want to withdraw his money after the end of the contract, or the client himself initially established the procedure for automatic renewal, the bank has the right to extend its validity for a second term. This is convenient because it saves the client from having to go to a bank branch and enter into a new agreement. Beneficial for the bank too:
- There is no need to waste time drawing up a new contract.
- The client's money remains in the bank's circulation.
Not everything is clear for the client. If, by the time the deposit expires, the bank has excluded this product from its offers, it can extend the deposit at the very minimum percentage without the knowledge of the account owner. Or it can unilaterally change the terms of the contract. So it is best to monitor the status of your savings personally.
Is it necessary to extend the residential lease agreement?
First, let's define the wording. A lease agreement is concluded when an individual rents residential premises to a legal entity. If the agreement is concluded between two individuals, then the agreement is called a rental agreement. This is stated in Chapter 35 of the Civil Code (Civil Code) of the Russian Federation (Article 641).
Important: the rental agreement must indicate the validity period of the agreement. If the period is not specified, then it is automatically equal to 5 years (Article 683, clause 1 of the Civil Code of the Russian Federation) and is considered long-term.
And in accordance with the legislation of the Russian Federation (Article 651, clause 2 of the Civil Code of the Russian Federation), a lease (hire) agreement concluded for a period of more than 1 year must be registered in Rosreestr (the unified state register of real estate of the Russian Federation).
Therefore, when renting out an apartment or house, the optimal maximum period for concluding a contract is 1 year minus 1 day . Otherwise, a landlord who has not registered a long-term agreement with Rosreestr may become a violator of the law and be subject to administrative punishment.
Example: you entered into a rental agreement on December 1, 2018. In order not to register this agreement, you need to indicate in the document the following expiration date of the agreement: November 30, 2019.
Conclusion: if you do not want to register a rental agreement for residential premises with Rosreestr, you should not include a prolongation clause in the document . The best option, if the parties wish to extend their contractual relationship, is to draw up a new agreement at the end of the contract for the next annual period.
Pros and cons of prolonging deposits at Sberbank
Despite the apparent simplicity of the procedure, unpleasant surprises may await the client. Especially with automatic extension of the deposit. Thus, during the term of the agreement, the interest rate on this type of deposit may change downward. The bank is obliged to warn the client about this, and in principle it does this in the form of SMS mailings. But a person may not pay attention to the messages or not understand what they are talking about. During the term of the agreement, the bank by law does not have the right to change the terms of the deposit. But from the moment the contract is automatically renewed, the profit on the deposit will be calculated at the new rate. Therefore, it is still preferable for the client to personally follow this process. In your personal account you can always see changes in conditions for one or another type of deposit.
It also happens that during the validity period of the contract, this type of deposit became irrelevant, and it was excluded from the list of existing products. Then the interest rate on the deposit may drop from 6-7 percent to 0.1%. At the same time, the bank does not violate the law, which is confirmed by Article 842 of the Civil Code of the Russian Federation. And the longer the deposit is extended, the more losses the account owner will suffer. In this case, the best solution is to close the deposit and open it again under new conditions.
Sberbank often practices changing the interest rate on deposits, both lower and higher. By tracking these trends, the client may find it profitable to close one deposit without prolongation and open a new one at a better interest rate.
Rolling over a bank deposit
An individual or legal entity (what is it?), opening a deposit account in a bank, has the main goal of receiving income in the form of interest accrued by the bank (you can learn more about the deposit from another article on our blog).
The bank enters into a contract with an individual. or legal person has an agreement where all the terms of the current agreement are stated: the interest rate, the amount of the deposit, the term of the agreement . Why is the deadline specified?
The bank is obliged to comply with the terms of the agreement concluded with the client, i.e. must pay him the interest specified in the contract. The economic situation in a country can either improve or worsen. The bank, like any commercial organization, will not operate at a loss under changing market conditions.
For example, the maximum tariff rate on deposits in Sberbank as of December 1, 2020 is 7.15%. The rate is calculated based on the key rate set by the Central Bank (CB) of the Russian Federation, inflation dynamics and other factors. The key rate as of December 1, 2018 is 7.5%, the inflation rate at the end of the year, according to forecasts of the Ministry of Economic Development of the Russian Federation, will be about 4%.
Consequently, Sberbank can afford to pay its depositors 7.15% per annum after a certain period. But what happens if inflation and the Central Bank’s key rate drop sharply?
It will become unprofitable for the bank to pay customers the previously established interest, and it will reduce the rate on deposits. But to persons with whom an agreement has already been concluded at 7.15% per annum, the bank is obliged to pay them. Thus, the established specific term of the deposit agreement is a kind of insurance for the bank when the economic situation changes.
Important: if the deposit agreement provides for a prolongation, then the interest rate for the new term is set in the amount provided for new clients under this type of agreement.
For example, a deposit was issued in December at 7.15% per annum for 6 months. After six months, the contract is extended (if such a clause is specified in the contract and the client does not withdraw the deposit and the interest accrued on it). Let’s say the interest rate on this type of deposit in June next year will be 6%. Consequently, the deposit will be extended at 6% per annum.
If the terms of the agreement provide for the capitalization of interest (the addition of accrued interest to the principal amount of the deposit), then when prolonging the deposit agreement, interest will be accrued on the amount of the principal deposit increased by the amount of interest.
