When it comes to financial planning, fixed deposit account can be an excellent choice. Fixed deposits, also known as term deposits, offer a range of benefits that make them a popular investment option for individuals and businesses alike.
In this blog post, we will explore the various benefits of opening a fixed deposit account.
Overview of a Fixed Deposit Account
Below is what differentiates fixed deposit from other financial instruments to save:
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What are the Benefits of Fixed Deposit?
Fixed deposits (FDs) are a safe and offers a fixed rate of interest. This means you can earn a stable return on your investment without worrying about market fluctuations. With FDs, you can enjoy the following benefits:
- Assured rate of interest: FDs provide a fixed interest rate, and banks offer online calculators to help you determine the interest you will earn at maturity.
- Hassle-free investment: Opening an FD is easy. You can invest through a savings account at a bank branch or online. When your FD matures, you can choose to renew it or have the amount credited to your account.
- Compound interest: By reinvesting your matured FD amount, you can earn compound interest on both the principal and the interest earned.
- Ease of reinvestment: When your FD matures, you can either have the amount credited to your account or reinvest it for another predetermined period.
- Flexible tenure: Banks offer various tenure options, ranging from 7 days to 10 years, allowing you to choose the duration that suits your needs.
- Tax-saving benefits: Many banks in India offer tax-saving FD options, reducing your taxable income. It’s recommended to consult your bank for detailed information on FD tax savings benefits.
- Loan against FDs: Instead of taking an unsecured loan at a higher interest rate, you can use your FD as collateral to secure a loan for yourself.
Read More: Fixed Deposit (FD) Vs Public Provident Fund (PPF)
FAQs
Should I invest in fixed deposits?
Investing in fixed deposits is considered a safe way to build savings for the future. P
What is the minimum value to be deposited on a fixed deposit account?
The minimum deposit amount for a fixed deposit account can vary depending on the bank and its specific terms. Typically, banks require a minimum deposit of around Rs. 500 or Rs. 1,000, though this can vary.
Can I add 1 lakh rupees to my fixed deposit account?
Yes, you can add 1 lakh rupees to your fixed deposit account, provided the bank allows it and you meet any minimum deposit requirements they have in place.
Which is better, LIC or fixed deposit?
The choice depends on your goals and risk tolerance. LIC offers insurance coverage and investment options, while fixed deposits provide a safe and guaranteed return. Assess your needs and consult a financial advisor for the best option.
Can I do an FD every month?
Yes, many banks offer recurring deposit (RD) accounts where you can deposit a fixed amount every month for a predetermined period. It's a convenient option for regular investments without a lump sum amount.
