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Different Types Of Fixed Deposits That You Should Know About
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A fixed deposit is a type of financial instrument which an individual deposits an amount of money with a bank for a fixed period of time. The bank in turn provides a fixed interest rate for the time period the money has been deposited for. When the time period ends the bank returns the amount deposited plus interest. This is believed to be the safest form of investment for excess funds as there is no risk posed to the customer. Also, the interest rate provided is generally high making it a financially beneficial investment. There are several types of fixed deposits which one can choose from:
1. Standard FD
This is the most basic type of FD available for customers. The tenure of these deposits range from seven days to ten years depending on the customers preferences. The interest rate charge varies from bank to bank.
2. Special FD
This type of deposit is called a special tenure fixed deposit as it allows an investor to deposit money for special periods such as 190 days, 290 days, 390 days, etc. the interest rate provided to investors in this FD are slightly higher than those of a regular FD.
3. Tax Saving FD
This type of an FD is for investors who wish to save on tax. The minimum tenure for which one can deposit money is 5 years while the maximum tenure is 10 years. The one condition with this FD is that one cannot withdraw the money until the tenure ends. The money deposited is locked down until the assigned tenure ends. Even though this FD helps one save on taxes, the interest provided is fully taxable by the government.
4. Floating Rate FD
This type of a FD has been specially designed by banks due to which the interest charged changes based on the RBI rate change. This deposit allows investors to take advantage of higher interest rates. However, this type of a fixed deposit does pose a certain amount of risk for an investor. The flexible interest rates mean that there is a chance that the interest rates may fall lower than those offered in a regular FD.
The main purpose of a fixed deposit is that it provides investors with a higher interest rate for their surplus funds. Such deposits require one to open a separate account. Such deposits also offer a variety of interest payment options for investors. There are monthly, quarterly and reinvestment of interest options for the investor to choose from. The reinvestment interest option allows the bank to reinvest the interest received again into a fixed deposit.
Author Bio :
An experienced writer on finance topics, the author articulates of investment choices such as fixed deposit products in India & recurring deposit schemes. She writes about a variety of topics including the benefits of recurring & fixed deposits and how to make the right investment choice.
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