Of the preferred investment instruments in India, Fixed Deposits stand out. Everyone, especially senior citizens, prefers parking their hard-earned funds in FDs owing to the features like safety, guaranteed returns, and more. People rely on them because of their monthly interest rates, which are either the main or an additional income source. With some unique tools the banks offer, you can determine the interest rates you will receive.
Despite the falling Fixed Deposit rates over the years, it has remained the preferred option amongst all. Some prefer to opt for Long-Term Fixed deposits because they offer better prices than short-term ones. But before you invest in them, learn why you should opt it:
Better interest payouts
When you fill out the account opening form, opt for the monthly or quarterly interest payout. The funds get credited to your account on the date specified on the receipt. The FD rates offered by banks are attractive. Senior citizens receive additional interest rates on their deposits. The other option is through cumulative FDs. Here, you receive the entire sum along with interest after maturity. You can check the interest you will get using the FD calculator.
Reinvest interest rates
The FD returns and interest received are different concepts. Many opt to reinvest the interest paid on FDs. You need not withdraw the interest paid, thereby increasing the principal. If you opt for quarterly interest payments without withdrawing the interest, the bank adds them to the principal amount, and you end up paying interest on the compounded amount.
If you repeat the process, the interest returns grow. They are best for those who are not dependent on FD for income.
There are times when you might need to break the FD. This happens when you require urgent funds owing to emergencies or the other bank offers higher interest rates. Whatever the case, if you break the FD, you need to pay the penalty. If you opt for premature withdrawals, the bank lets you make withdrawals for an interest lower than the applicable interest. Some also allow early withdrawals on a pro-rata basis.
Interest rates calculation easier
Opening an FD Account is like ticking off your budget list and making them work towards your financial goals. Use the FD calculator before investing in one, and plan your finances accordingly. You can compare different FD schemes offered by banks and other financial institutes. You also learn about the best returns you can receive at the desired tenure.
Now that you know why FDs are preferred visit the Banking app or the nearest bank branch to open the account.