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What is a Bank Deposit Certificate (CDB)?

 

CDB stands for Certificate of Bank Deposit. It is a fixed income security that represents a loan you make to the bank. The bank then remunerates you with interest on the amount invested. This is a way for the bank to raise money from investors and lend to borrowers.

There are CDB titles of various values. There are securities sold for less than a thousand reais up to securities over thirty thousand reais. Therefore, there are CDBs for all preferences and amenities.

To invest in CDB, you must have an account with a brokerage house or investment bank that operates this type of paper.

Risk and Profitability

The risk of CDBs is extremely low, since these securities are covered by the FGC (Credit Guarantee Fund) for amounts of up to R$250 thousand per banking institution. If you want to invest more than that, the ideal is to divide your investment between two or more institutions, since the FGC coverage limit for each CPF is R$1 million.

Smaller institutions generally offer the most profitable securities, as they have less credibility with large banks and therefore need to pay better rates to attract investors.

There are three forms of profitability when it comes to CDBs:

  1. (i) Post-fixedIn this case you link the income from the asset to some rate used as reference. Generally this rate is the SELIC or CDI. In this case, you only find out the exact yield of your security at the end of the period.
  2. (ii) fixed in advanceHere, the yield of your asset is already known from the moment of application. It does not depend on external reference rates, such as the inflation rate or the SELIC

(iii) HybridAs the name suggests, it is a mixture of post-fixed and prefixed profitability. The prefixed part is a specific interest rate (for example, 10% per year), while the post-fixed part is some inflation index, like the IPCA.

Incidence of taxes

Income tax and IOF are charged on the profitability of the CDB, that is, on the difference between the amount redeemed and the amount invested. The IOF collection follows the regressive table, which establishes rates that reduce according to time, starting with a rate of 96% and reaching 0% after 30 days. That is, you will only be taxed with IOF if you redeem the application before 30 days. After these 30 days, no more IOF will be charged when you redeem the bond.

Income tax collection also follows the regressive table. The income tax is taken directly from the source, that is, you do not need to declare the value of the CDB to the Revenue.

The taxation follows the following scheme: up to 180 days, the rate charged is 22.5%. From 181 to 360 days, the rate is 20%. From 361 to 720 days, 17.5%. Finally, above 720 days, the rate will be 15%.

Advantages and Disadvantages

One advantage of the CBD is that its profitability is greater than that of savings, and can be as much as double that. In addition, depending on the type of CBD, there is daily liquidity, that is, these securities can be redeemed at any time, which is important for those who may need the money before maturity

Moreover, CDB titles have FGC warranty, so they have high security. Should the bank go bankrupt, you can rest assured that you will still receive your money invested.

One disadvantage of the CBD is that it is a taxed application. There is incidence of income tax and, if you keep your investment for less than 30 days, also the IOF.

Grace period vs. maturity

When applying in CDBs, it is important to keep in mind the difference between the grace period and the maturity period. The grace period is the minimum period you must leave your money with the bank, with no possibility of withdrawal. After this period, you can redeem your money whenever you want.

The due date stipulates how long the bank will keep your money. After this period, the bank will return your investment plus interest. Sometimes the redemption is not allowed before the due date.

It is important to check what the grace period and expiration date of the CBD are before making the purchase.

Conclusion

If you want to invest in a low risk, good return fixed income asset, CDBs are certainly a great alternative.

This type of asset can be a good choice both for those who want to invest in the short term, through daily liquidity CDBs, and for those who want to invest in the long term, choosing a security with remote maturity.

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