Did You Know These Facts About Fixed Deposit?

By Author: John Judge
Total Articles: 6
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Term fixed deposit also known as fixed deposit is a popular investing instrument amongst people from all the classes. It enables you to invest a lump-sum amount at an agreed rate of interest for a specific tenure.

The time period for fixed deposits can range between one month to 5 years and the facility is offered by almost all banks and non-banking financial companies (NBFCs), post offices, credit unions and building societies. Banks and NBFCs offer fixed deposit at relatively lower interest rate whereas companies offer benefit of higher rate of interest. You can invest in Fixed Deposit to multiply your corpus and earn better return on investment in same time span.

Understanding the nature and structure of FDs is not that complex and thus a lot of people choose it over other options. Although, it is important that you gather as much information about the plan as you can regardless to the plan you choose.

Fixed deposit too has many such features that you must make a note of to invest smartly and expect practical results. Here are a few facts about fixed deposit that will help you plan your investment better.

1.Interest Rate – The interest rates on fixed deposits offered by banks are fixed as the banks decide and it varies from one bank to other. It is crucial that you find out and compare the interest rates offered by different banks and NBFCs before deciding and choosing a trustworthy option.

2.Investment Period – With fixed deposits you have the freedom of choosing the tenure of investment. And thus, it is necessary to compare the interest rate to tenure ratio before deciding the tenure of your fixed deposit. Usually the banking institutes offer higher interest rate for longer tenure.

3.Safety of Investment - As discussed earlier, interest rates on fixed deposits are assured. Which means changes in the economy doesn’t affect or change the rate of interest prefixed for the FD. Thus, making FDs the safest investing option.

4.Minimum Account Balance Required – The minimum account balance required to open fixed deposit differs from bank to bank. Some banks allow you to open FD for an amount as little as ₹1,000. In case you are opening FD for a minor it is usually ₹2,000. You can check the details about your FD before you decide with the help of online fixed deposit calculator.

5.Rollover - As an investor if you don’t wish to take the money out on your FD after maturity you have an option to redeposit the money as a fresh fixed deposit. This feature is called rollover that is reinvesting the maturity proceeds in a fresh term deposit adding to its interest.

6.Pre-Mature Withdrawal Penalty – Although it is suggested to avoid withdrawal of money invested in fixed deposit before maturity, it allows money withdrawal before maturity. You can withdraw the money partially or completely from your FD with a penalty fee. You can check with your bank the penalty fee on premature withdrawal before investing.

7.Insurance – As per the guidelines of RBI regulations, money deposited in a certified bank is eligible for an insurance cover of up to 1 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Keep these facts in mind before investing in Fixed Deposit and make a smart decision to gain maximum benefit