What is Call Money?
Call money is money that you put in a special bank account. This special account pays you interest. Interest is extra money the bank gives you for keeping your money in their bank.
The special thing about call money is that you can take it out of the account whenever you want. But, you have to tell the bank one day before you want to take it out. This is different from a regular savings account, where you can usually take your money out right away.
Who Uses Call Money Accounts?
Most of the time, call money accounts are used by big companies or investors. These are called institutional investors. Institutional investors put a lot of money in the bank at one time.
Institutional investors might take their money out of a call account very fast. They do not always leave the money in the account for a long time like regular people do with their savings accounts.
How Does a Call Money Account Work?
When you put money in a call money account, the bank pays you interest. The amount of interest the bank pays you depends on how much money you put in the account. It also depends on how long you leave the money in the account.
The bank can use the money in your call account to give loans to other people or businesses. The bank charges them interest on these loans. This is one way banks make money.
But, the bank always has to be ready to give you back your call money when you ask for it. As long as you tell them one day before, they have to give you your money.
Benefits of Call Money Accounts
There are a few reasons why institutional investors like to use call money accounts:
1. Earn Interest
The main reason to put money in a call account is to earn interest. When you keep your money in a regular checking account, the bank does not pay you much interest. Sometimes they pay no interest at all.
With a call account, you earn more interest than you would with a checking account. The more money you put in, the more interest you earn.
2. Easy to Access Money
Another good thing about call accounts is that it is easy to get your money when you need it. With some other types of accounts, you have to leave your money in for a set amount of time. Or, you have to pay a penalty if you take your money out too soon.
With a call account, you just have to tell the bank one day before you want to take money out. This makes call accounts very flexible.
3. Safe Place to Keep Money
Banks are a safe place to keep your money. When you put your money in a call account, the government insures it up to a certain amount. This means if something bad happens to the bank, you will not lose your money.
Keeping a lot of cash in your office or home can be risky. Someone could steal it or it could be destroyed in a fire. Putting it in the bank protects your money.
Drawbacks of Call Money Accounts
Call money accounts also have some downsides compared to other ways to save or invest money:
1. Lower Interest Than Other Accounts
The interest you earn on a call account is usually lower than what you could earn with other types of accounts. For example, if you put your money in a certificate of deposit (CD), you will probably earn more interest.
But, with a CD, you have to leave your money in the account for a set amount of time. You cannot take it out whenever you want like you can with a call account.
2. Have to Give Notice to Withdraw
With a call account, you have to tell the bank one day before you want to take your money out. This can be inconvenient if you need your money right away.
With a regular checking or savings account, you can usually take your money out whenever you want. You do not have to give the bank any notice.
3. Minimum Balance Requirements
Many call accounts require you to keep a certain amount of money in the account. This is called a minimum balance. If your account goes below the minimum balance, the bank might charge you a fee.
Regular checking and savings accounts sometimes have minimum balance requirements too. But they are usually lower than the minimums for call accounts.
How to Open a Call Money Account
If you are an institutional investor and want to open a call money account, you will need to contact your bank. The process is different at each bank.
Usually, you will need to provide some information about your company or organization. The bank will also ask how much money you plan to deposit into the account.
The bank will then set up the account for you and tell you what the interest rate will be. They will also explain any rules or requirements for the account.
Documents Needed
To open a call account, you will usually need to provide:
- Proof of identity for yourself or your company
- Business registration documents if you are a company
- Proof of address for yourself or your company
- Information about the source of the money you plan to deposit
The specific documents needed will depend on the bank and the country you are in.
