The surprising offer of a bank that pays higher interest rates if the CD is for a shorter term: starting from $100,000

The return on CDs depends on market conditions, but also on the amount invested and the term. In general, interest rates increase as the period during which the client gives his money to the bank is extended. In other words, the holder receives higher interest when opening the CD for one year, compared to what he/she would obtain if the agreed term were 6 months.
You may be interested in: Check here if you are entitled to the Renta Ciudadana subsidy and how to claim it: there are thousands of beneficiaries
In the case of Pibank virtual banking, the CDT can be fixed for two terms: 180 days or 360 days. In this regard, it is noteworthy that the entity established the following interest rates, which contradict the logic of these financial products:
180-day CD: yield of 14.15% per year. 360-day CD: yield of 13.95% per year.
Although the rate has gone down, in response to market trends, the rates shared on Pibank’s platform show higher interest rates when the investment is set at 180 days (6 months), than when it is set at 360 days (one year). This is a situation that is not offered by other banking entities in the market, and that several users noted on the entity’s Twitter account:
¡Abre ya el CDT Pibank! Elige el plazo que se ajuste a tus necesidades:
— Pibank Colombia (@Pibank_co) July 14, 2023
14,15% E.A. a 180 días
13,95% E. A. a 360 días
The CDs offered are backed by Fogafín when the amounts do not exceed 50 million pesos, and can be opened in pairs, as Pibank allows up to two holders per CD. However, it should be noted that the CD is automatically renewed at maturity. Therefore, if you wish to increase or decrease the amount, you must wait for maturity and open a new CD.
Read also: Actors on strike in Hollywood: The billion-dollar industry on the brink of collapse
How to calculate the profitability?
What is the difference in yield if the term is set at 360 days or 180 days?
If you open the CD with a total of $100,000 COP for 180 days (6 months), the interest rate will be 14.15% effective per annum, so your net return will be $6,567.36 COP. On the other hand, if you open the CD with a total of $100,000 COP for 360 days, the rate drops to 13.95% effective per annum, so your net return will be $13,392 COP, a proportionally lower figure.
If the amount with which you start your investment is $1’000,000 COP, then your net return will be:
- At 180 days: $65,673.6.
- At 360 days: $133,920.
What are CDs?
The Certificate of Deposit, known as CD, is a document in which it is stated that the client has left at the disposal of the banking entity a determined amount for a fixed period of time. Once the period ends, the client can again access the deposited amount plus the agreed profitability.
This means that when the client acquires a CD, it is the bank that disposes of that money and uses it for internal operations. Meanwhile, the client accumulates a percentage of profitability that depends on the amount, the time the bank has to use the money and market conditions. This is a savings alternative that generates a certain return with low risk.
In the market, it is possible to find multiple options available in which, the longer the time, the higher the interest the client obtains.
What is Pibank
Pibank is a digital bank that arrived in Colombia after more than 5 years in Spain. It belongs to the Pichincha group, the largest private banking group in Ecuador, and offers interest rates that differentiate it from traditional banks.
The platform allows users to perform all banking operations of its products virtually, without going to any branch or standing in long lines. The entity offers its customers the possibility of acquiring savings accounts with an effective annual return of 10% and CDs with a profitability model that grants higher interest at a shorter time.
Note that to acquire a CD with Pibank, you must first have an account with the entity.
Continue reading: Renewable energy consumption was only 7.5% worldwide in 2022: oil and coal dominate global energy scenario