The fixed deposit or FD is the most suitable way to secure your money. It helps you save your money and offer interest. It’s a form of term deposit where you can get a higher interest rate when compared to savings accounts. Banks and NBFCs can offer fixed deposits (FDs).
You can invest the money for a fixed term between seven to ten years at the given interest rate. You might earn the interest on the FD as per the terms and conditions. There are various options for how you can get FD interest. You can get the amount credited to the account at certain intervals. Alternatively, you might also recur a deposit account and earn interest during the time of maturity of your FD.
Outlining the Top Features of an FD
The following are the features of fixed deposit as mentioned below:
- The FD is a scheme that lets investors earn a higher interest
- The money should be deposited in one account at one time
- You need a new FD in case you wish to deposit more amount
- Renewing the fixed deposits is a simple process
- According to Income Tax Act, 1961, the tax can be deducted at source from the interest amount.
- Liquidity is less in fixed deposits, so the interest will be higher.
Understanding the Types of Fixed Deposits – 2 Types Available
The following are the types of fixed deposits:
Non-Cumulative Fixed Deposit
Such a type of fixed deposit might offer interest every month, yearly, or quarterly. It entirely depends on your decision: how you want to receive the payment for your interest. Most importantly, these FDs offer a low interest rate. It’s suitable for people who wish to earn a regular income via savings.
Cumulative Fixed Deposit
The first is the cumulative fixed deposit that provides compounded interest yearly or quarterly. Here, the interest amount is paid during the time of maturity. The cumulative FD provides a higher interest rate. This type of fixed deposit is most suitable for individuals planning to save money and grow their savings.
Can Fixed Deposits Offered to Seniors?
Banks offer higher interest rates to seniors than the amount for general citizens. The FD interest rate may generally vary between 3-8%. Nonetheless, a senior citizen may get the benefits by submitting their documents.
Bank may levy interest charge on premature withdrawal on fixed deposits Wrapping up
Banks offer a lower interest rate on bulk deposits that exceed ₹2. Crore. On the contrary, they offer a higher rate on deposits less than ₹2 crore. The changes in RBI’s monetary policy determine the interest rates for fixed deposits. Parameters evaluating the change include base rate, repo rate, the bank’s internal liquidity position, economic conditions, credit demand, and more.
So, if you want to secure your money, visit the bank for the FD.