In case you have any
excess cash, you can park the same either in a savings account or in a fixed
deposit. The predictable returns and safety of the capital invested make them
an excellent choice. That said, a fixed deposit has many more benefits over a saving
account. Let us check out some of these advantages:
Higher interest rate
Your investments in a fixed deposit earn higher interest than a
savings account. You need to look for the highest
fixed deposit rates in India that can help you beat the inflation in the economy to
a large extent. The interest rates can vary from 7.8% per annum to 8.45% per
annum based on the tenure of the deposit and the type of fixed deposit chosen.
No exposure to marker fluctuations
FDs earn a fixed,
guaranteed return. As such, they do not carry any risk of market fluctuations.
The predictability of returns allows you to plan your finances better. It also
makes fixed deposits an ideal option for short- to mid-term horizon where
capital preservation is more important.
A higher interest rate is offered to senior citizens
Most banks and NBFCs
offer a higher interest rate to senior citizens when compared to other
depositors. It is typically 25 to 50 basis point higher. It makes fixed
deposits a great choice for investment in your post-retirement years.
Periodic payout of interest earned available
Unlike with savings
account, you can select a frequency at which you would like the interest earned
on the fixed deposits to be paid out. These could be as short as a monthly
payout https://www.sofi.com/roth- ira-calculator/, or as long as an annual payout. It allows the fixed deposit to act as a
source of regular income, allowing you to plan your expenses accordingly.
Promotes saving behaviour
As a fixed deposit has
a maturity period and withdrawing before this results in a penalty on the
earning. It promotes the habit of savings. It also promotes discipline as you
cannot withdraw the amount willy-nilly as you can from a savings account. The
limited access can make some save more by curtailing impulse buys and other
unplanned expenditure.
Tailored to your needs
You can tailor the
maturity period and interest payout mechanism of a fixed deposit according to
your needs. Do you need a regular income from your investments? No problem,
choose a non-cumulative fixed deposit with a long maturity period. Would you
like to build a corpus of funds as you have other stable sources of income?
Perfect! Choose a cumulative fixed deposit and see the magic of compounding
interest rate.
Loan availability
It is convenient for
you to apply for a loan against your fixed deposits. As fixed
deposit act as collateral for the loan, the interest rate charged on
such loans are lower than personal loans.
Fixed deposits earn a
higher interest rate, allow for periodic payouts and enable a loan if required.
Thus, FDs are, often considered, a better place to park your excess funds
compared to saving accounts.
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