Term accounts (CAT) allow savers (and companies) to invest their money over a limited time horizon and with a guaranteed return over the entire duration of the investment . This yield is fixed at the time of subscription, depending on the establishment (so you have to choose your CAT carefully ).
In this article, we take stock of the characteristics of term accounts (sometimes called “term deposits”), their operation and their taxation. Finally, we will see if they are an interesting alternative to passbooks and other financial products. Thus, you will be able to form an opinion on the interest of term accounts according to your situation.
Note from Nicolas : for entrepreneurs who wish to invest their cash (in a term account or other solutions), we refer you to our dedicated article: entrepreneur: what investments for his business cash?
The term account (CAT) is a savings product allowing a sum of money to grow over a limited time horizon, with a rate defined at the time of subscription. Generally, the duration of the placement is between 6 months and 5 years (but can go beyond). As for the return, it depends on the duration of the placement and the establishment marketing the CAT. The yield issue is discussed in more detail later in this article.
CATs are secure investments . By regulation, they are guaranteed by the Deposit and Resolution Guarantee Fund (FGDR) up to €100,000 per depositor and per establishment. So there is no risk of loss on the capital invested. On the other hand, the yield of these products is generally low.
However, the performance of CATs is generally higher than that of booklets . This over-remuneration is justified because of the constraint linked to the duration of the placement . Indeed, with the term account, the saver does not have to withdraw money before the term defined at the time of subscription. Or if he withdraws money from the CAT before its term, it will be closed and there will be a performance penalty. This penalty is known to the investor in advance and appears in the conditions of the contract.
An important characteristic of term accounts is that their return is all the more important as the investment horizon is long .
Payments on term account
In order to open a term account, a minimum sum is required which varies according to the banks. In practice, the transfer that opens the CAT can only be done once. So you will not be able to reinvest several times on the same CAT . If you want to place money in a term account again, you will have to open a second one.
Consequently, as soon as the term account is opened, you know exactly how much you will receive at the end since the transfer is done in one go, the duration is defined and the interest rate is fixed.
Contrary to the rates of savings accounts, regularly reviewed, generally downwards in recent years given the drop in rates. But since 2022 and the rise of inflation, the livret A is now remunerated at 2%.
In practice, you can see dozens of CAT offers with the interest received thanks to the Raisin comparator (our opinion) . Access to the comparator from the banner below:
Who are term accounts suitable for?
Term accounts are aimed both at individual savers and at companies who want a secure investment . The latter regularly use term accounts to invest their cash surpluses. Thus, term accounts constitute a cushion of security that the company will release only in the event of a hard blow. In this sense, companies generally opt for a long investment horizon, in order to benefit from the maximum remuneration. And in the event of withdrawal earlier than expected, the remuneration will certainly be reduced but positive.
Note from Ludovic : It is possible to open several term accounts, with different investment periods, in order to respond to different financial projects. Thus, if necessary, we “break” a CAT without affecting the others who continue to run.
Taxation of the term account
Interest on the term account is taxed. By default, CATs are taxed at the single flat-rate levy (PFU, also called flat tax), the rate of which is 30% . This rate is made up of social contributions (17.2%) as well as a fixed rate of 12.8% for income tax.
Prefer the tax option to the income tax scale?
Taxpayers in the lowest marginal tax brackets (TMI) of the income tax scale ( TMI 0% and 11% ) will in principle have an interest in opting for the progressive income tax scale. income to report their earnings. Thus, they will then pay the 17.2% social security contributions and possibly an additional levy (0% or 11% depending on the marginal bracket in which they are located). Which is less than the 30% flat tax. Also, by opting for the progressive scale, part of the CSG is deductible.
Note that when you opt for the progressive scale of income tax (rather than the flat tax or PFU), this method of taxation will apply to all of your income from assets.
Note from Ludovic : This taxation is the same as that which applies to unregulated bank books (also called taxed books). As for savings accounts regulated by the State, such as the Livret A and the Livret Développement Durable et Solidaire (LDDS), their interest is not subject to tax. Thus, when we compare the return of 2 investments, we compare the net return. For example, an investment at 1% gross taxed at 30% will give a better net return than the untaxed livret A: 0.70% net against 0.50% for the livret A.
In which situation is it interesting to opt for a term account?
As we regularly explain on Avenue Des Investisseurs, the asset allocation strategy (distribution of savings between secure investments, equities and real estate in particular) is specific to each saver. Because it is built according to the financial objectives, the investment horizon and the risk aversion of each.
Term accounts are savings products meeting short and medium term investment objectives , and/or with a view to diversifying savings on a product with no risk of capital loss. So CATs are placed in the “secure investments” category of the asset allocation, in the same way as savings accounts and euro funds . Thus, they appeal to prudent savers.
Note from Ludovic : Investors with a long-term investment horizon, particularly with a view to preparing for their retirement and/or obtaining additional income, will have an interest in diversifying their assets into equities (investing in the stock market) and real estate , two historically successful long-term investments. Provided you accept the risk of capital loss and use the right methods to invest well in real estate and invest well in the stock market . That said, even long-term investors must keep part of their wealth in secure investments, which is what CATs meet.
