Fixed Deposits, with the desired lock-in period, are the best way to save money for the future. Banks offer their customers a seven-to-nine-day lock-in period to make FDs last for five to 10 years. Withdrawing the funds before the maturity period results in a penalty. The amount invested in an FD Account remains blocked for a fixed period when a customer deposits an amount monthly and receives interest.
You cannot withdraw it before maturity. However, doing so during emergencies or otherwise attracts a penalty. Upon maturity, the bank credits the entire amount with interest to your Bank Account. Understand the deposit type, advantages, and amount after assessing your financial needs.
How do They Work?
Banks constantly need money for sanctioning Loans to businesses and clients. They offer Term Deposit options to all the investors that help them acquire funds for a fixed period in return. After investing your money, it gets blocked for a specific time. You cannot withdraw the money before the scheduled date. Your interest adds to your principal amount after a specific interval, resulting in incremental growth.
Advantages
By opening a Fixed Deposit, you get an assured return on your investment at a fixed interest rate and tenure. Even if they fall after the investment, your deposit does not get affected. It is easy to open and operate online since banks offer all their products digitally to enhance services and customer experience.
You can choose the investment amount, tenure, and pay-out options according to your needs. In emergencies, you can apply for a Loan against the deposit amount without breaking it. It saves you from penalties and losing out on a chunk of your savings. The minimum investment amount in banks is as low as Rs. 1,000, making it a lucrative investment option.
Tools
You can use the RD calculator by comparing your amount against several tenures. You need to enter the monthly investment amount, interest rate per annum, and investment term to get accurate results. It is simple to use, freely available and reduces stress and errors caused by manual calculations.
Types
There are different FDs you can opt for as per your needs: Cumulative and Non-Cumulative. In a Cumulative FD, you receive the interest income and the invested capital during maturity. Under Non-Cumulative Deposits, you receive the interest on a monthly, quarterly, half-yearly, and annual basis.
After the digital era, all banks are offering their products on the Banking app, making it user-friendly and convenient to access from anywhere. Smartphones have become inseparable from humans, increasing their dependency on apps.
Conclusion
These traditional investment options are still popular among millennials. FD and RD develop a regular investment habit among individuals to instil discipline. Most banks offer both products to their customers to create an emergency corpus and gain higher interest rates.
