Know all the Benefits of a Fixed Deposit Account!

byPriyanka JuyalLast Updated: January 27, 2023
Benefits of fixed deposits
Benefits of fixed deposits

There are several ways to save money for the future, such as PPF, EPFO, RD, and FDs. When comparing these options, fixed deposits are considered the best and safest way to save for the future.

Investing in fixed deposits allows individuals to deposit a fixed amount of money and earn interest on it. Banks and financial institutions offer competitive interest rates, and some allow for the early withdrawal of funds without penalty. ‘Paytm Payments Bank’, on the other hand, offers FD accounts with no lock-in period and no penalty for early withdrawal. In this blog, we will learn more about the benefits of fixed deposit accounts.

Overview of a Fixed Deposit Account

Below is what differentiates fixed deposit from other financial instruments to save:

Parameters
Explanation
Fixed Deposits
  • One of the various types of investment options
  • Customers are required to deposit a fixed amount for a predetermined period of time
  • Principal amount along with the earned interest is credited to the customer’s account after maturity
  • Premature withdrawal is permitted, but a penalty must be paid
  • Compound interest is paid if the FD amount is reinvested after maturity
Who offers FDs
  • Banks
  • Financial institutions
Ways to open FD
  • Online
  • Offline
Types of FDs
  • Senior Citizen FD
  • Tax Saving FDs
  • Flexi Fixed Deposit
  • Company Deposits
  • Cumulative Fixed Deposit
  • NRIs FDs
  • Non-Cumulative Fixed Deposit
  • Bank Deposits
  • Regular FDs
  • Standard FDs
Risk
  • No risk
Premature withdrawals
  • Allowed, but a penalty must be paid.

  • *With Paytm Payments Bank, there is no penalty for withdrawing funds from a fixed deposit account before the maturity period.
How to calculate FD
  • Use an online FD calculator
Interest rates
  • Interest rates differ from bank to bank

What are the Benefits of Fixed Deposit?

The benefits of fixed deposits are numerous, a few among them are listed below:

  • Safe Investment Option: FDs (fixed deposits) are considered a safe investment option because they offer a fixed rate of interest that does not fluctuate with market conditions. This means investors can earn a stable return on their investment over the predetermined tenure of the FD.
  • Assured Rate of Interest: FD users receive a fixed interest rate on their deposit. Interest calculators are available on bank websites to help users determine the amount of interest they will earn at maturity.
  • Hassle-free Investment: You can easily invest in fixed deposits with a savings account at a bank branch or online. When the FD matures, the amount can be renewed or credited to your account.
  • Compound Interest is Available: Customers can reinvest the matured FD amount for a duration of their choice. This means they will earn compound interest on both the principal amount and the interest earned.
  • Ease of Reinvestment: When a fixed deposit matures, customers can choose to have the amount credited to their account or reinvest it for another pre-determined period of time.
  • Flexible Tenure: Banks allow customers to choose the duration of their fixed deposits. There are several banks that offer terms ranging from 7 days to 10 years.
  • Tax Saving Benefits: A large number of banks in India provide their customers with tax-saving fixed deposit options, lowering the taxable amount to be paid. It is recommended that you contact your bank to gain a detailed overview of the FD tax savings benefits.
  • Loan Against FDs: Instead of taking out an unsecured loan and paying a higher interest rate, a person can use the fixed deposit amount to finance himself.

Read More: Fixed Deposit (FD) Vs Public Provident Fund (PPF)

FAQs

Should I invest in fixed deposits?

Fixed deposits, such as Paytm Payments Bank FDs, are considered the best and safest way to build savings for the future. Paytm Bank also offers competitive interest rates and no penalty for early withdrawal, making it a unique and attractive option for customers.

What is the minimum value to be deposited on a fixed deposit account?

The minimum amount required to open a fixed deposit account can vary depending on the bank and the specific terms of the deposit. In general, most banks require a minimum deposit of around Rs. 500 or Rs. 1,000, though some may have lower or higher minimums.

Can I add a 1 lakh rupees to my fixed deposit account?

Yes, it is possible to add 1 lakh rupees to a fixed deposit account, as long as the bank allows it and you meet any minimum deposit requirements.

How much does it take to create Paytm Payments bank FD?

Paytm Payments Bank offers a convenient and quick way for PPBL savings account holders to create fixed deposits using the Paytm App. This process can be completed in just a few seconds, allowing customers to easily invest their money and earn a fixed rate of return without the need to visit a bank branch in person.

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