The easiest investment option available to customers is a Fixed Deposit which is widely preferred. It is a safe and secure investment tool that lets you save and deposit a lump sum amount for a fixed tenure at a fixed interest rate. Upon maturity, you can earn interest on the funds you had invested and receive it alongside the initial investment.
Under the Depositor Insurance Programme of the DICGC, you can also buy Insurance of up to Rs. 5 lakh on your FD. However, before you go ahead and open a Fixed Deposit, you need to remember some points:
Credibility
FDs are offered by most commercial banks in India and other non-banking financial companies. However, before you open an FD with any, it is important to ensure its credibility. A higher rating ensures your investment is safe and that you do not face any difficulty when the deposit matures.
Interest rates
FD rates vary across banks and according to your chosen tenure, investment amount, age, and type of customer. FD rates are typically higher for a longer tenure. Senior citizens can also access the additional percentage and enjoy higher FD rates if they provide valid age proofs.
Type
FDs are typically Cumulative and Non-Cumulative. In Cumulative FDs, the interest earned periodically is compounded and you receive the entire interest when the FD matures. On the other hand, a Non-Cumulative FD delivers the interest earned at periodic intervals according to your preferred payout method i.e., yearly, half-yearly, or quarterly payouts.
Loans
Probably the most important advantage of opening a Fixed Deposit Account is the possibility of securing a Loan against it. This covers any of your financial emergencies and prevents you from prematurely withdrawing your FD and losing out on the interest income. Banks may allow you to secure a Loan of up to 95% of your FD amount.
Penalty
Premature withdrawal of an FD generally attracts a penalty. This rate varies across banks. Hence, you should consider the charges before you open a term deposit.
Convenience
Going to the bank, waiting patiently for your turn, and filling out a plethora of paperwork to open an FD is a cumbersome process. So, look for a bank that enables you to open an FD from the comfort of your space like through the Banking app or Internet Banking. This will make the process easier and lets you open a term deposit from anywhere and at any time.
You can also check if they can extend the FD tenure, alter the investment amount, or add nominee details easily through Online Banking. This makes the process more convenient.
Keywords: Fixed Deposit, Fixed Deposit Account