What Should You Know About Fixed Deposits?

A fixed deposit is a financial tool that allows you, for a pre-determined period, to invest or deposit your money. You get a higher rate of interest on the returns at the end of the tenure. The easiest and safest investment options are fixed deposits if you want to save your hard-earned cash for the future. The best part is you can open these on your online banking apps as well.

Before you make a move, though, the following are the things you have to keep in mind:

  • Tenure

Banks that offer a fixed deposit with high interest allow you to credit the money according to your requirements. The investment period varies from a minimum of seven days to a maximum of 10 years, and the minimum investment amount is as low as INR 1,000, with a maximum of INR 1.5 lakh.

  • Fixed-rate

The rate of interest on the returns depends on the amount you spend, the period, and the bank/financial institution you choose to invest in. With time, the rate of interest on your fixed deposit tends to change. The interest rate on the bank fixed deposit is stagnant once you invest your cash. For the chosen period, you will have to pay the same interest. You can opt to get the interest on a monthly/quarterly/half-yearly/annual basis at regular intervals, or you can get it at the time of maturity.

  • Loan

One of the different and fastest ways to collect the short-term debt is to build a loan against the current fixed deposit. At different rates, other banks provide overdraft loan facilities. As high as 90 per cent of your FD value can be the rate. Ideally, the tenure you are taking the loan for should be the same as the fixed deposit tenure and should not exceed the specified term.

  • Withdrawal

Although it is highly advantageous to have a bank FD account when it comes to saving money and earning high-interest returns, such an investment does not allow the investor to withdraw cash until maturity. You have to pay a nominal fee of 1 per cent on the prevailing interest rate as a tax if you do need to pull out cash from your fixed deposit account. In such cases, submit a letter requesting the early withdrawal of money from the account.

  • Save tax

You can invest in a tax-saving fixed deposit account to save your fixed deposit returns from tax deductions. They come with a lock-in duration of five years, until the expiration of which you can not remove any amount from the FD account. You will not be eligible for any tax benefits if you break up your fixed deposit before the lock-in period.

These are some of the vital facts that you need to remember before investing in fixed deposits with high interest. You should compare various banks to look for the best interest rates once you have learned what fixed deposits are all about.