Top 5 Differences Between Fixed Deposits and Recurring Deposits

Recurring Deposit vs Fixed Deposit

Recurring deposits and fixed deposits are the facilities offered by banks to promote saving among individuals. The amount on fixed deposits remains locked for a pre-decided tenure, whereas the amount on recurring deposits needs to be deposited every month for a particular period. Both RDs and FDs can be opened online either through mobile banking applications or net banking.

Table of content-

  1. A comparative difference between fixed deposit and recurring deposit
  2. What is a recurring deposit account?
  3. Features of a recurring deposit account
  4. Types of recurring deposit account
  5. How to open a recurring deposit account online
  6. How to open recurring deposit account offline
  7. What is a fixed deposit account?
  8. Features of a fixed deposit account
  9. Types of fixed deposit account
  10. How to open a fixed deposit account online
  11. How to open a fixed deposit account offline

The difference between fixed deposit and recurring deposit lies in their features, deposit requirements, tenure, interest rates, advantages, limitations, etc. In this blog, we will understand what a recurring deposit and fixed deposit is, their advantages, features, and the complete differences between a fixed deposit and a recurring deposit account.

A Comparative Difference Between Recurring Deposit and Fixed Deposit

The difference between fixed deposit and recurring deposit is given below-

ParametersFixed DepositRecurring Deposit
When to deposit amountLump sum in one goEvery month
Who can openAnyone with an active bank accountPerson with a regular source of income
Amount to be depositedVaries from one bank to anotherParticularly Rs 500
Tenure7 days to 10 years6 months to 1o years and beyond
TypesCumulative Fixed Deposit
Non Cumulative Fixed Deposit
Bank deposits
Company deposits
Senior citizen FD
NRIs FDs
Regular FDs
Standard FDs
Tax saving FDs
Regular recurring deposit account
Recurring deposit account for NRI
Recurring deposit account for minors
Recurring deposit accounts for senior citizens

What is a Recurring Deposit Account?

A recurring deposit is a kind of term deposit offered by banks to their customers. It allows customers with a fixed source of income to deposit a fixed amount of money every month to the recurring deposit account. The customer, upon depositing the amount, becomes eligible to earn interest on it.

  • Recurring deposit account requires one to submit the amount on a monthly basis for a pre-decided period
  • A recurring deposit account encourages the saving habits of the people
  • Recurring deposit accounts can be opened for short term, mid-term and long term periods. As per the chosen term, the interest paid by the bank will be also different
  • Banks offer various types of recurring deposits for regular individuals, children, senior citizens, NRIs
  • The interest rates on the types of recurring deposits differ from each other
  • The tenure to open a recurring deposit account might vary from bank to bank
  • Banks offer the flexibility to close recurring deposit account; however, a penalty has to be paid for the same

What are the Features of a Recurring Deposit Account?

Following are the features of a recurring deposit account that make it a preferable choice to save for the future-

  • The minimum amount to create a recurring deposit account is Rs. 500 per month (the amount might vary from one bank to another)
  • The minimum tenure to create a recurring deposit account is 6 months, whereas the maximum tenure can go up to 10 years
  • Multiple recurring deposit accounts can be opened by an individual account holder
  • Recurring deposit accounts for minors are also available; however, such accounts require parents’/guardian’s supervision
  • Partial withdrawal of the amount deposited in a recurring deposit account is not allowed
  • The automatic amount deduction feature helps in deducting a particular amount every month, instead of manually adding an amount to the recurring deposit account
  • Senior citizens get a higher rate of interest as compared to regular individuals having recurring deposit accounts
  • In case of withdrawing the money, a penalty has to be paid by the account holder
  • Recurring deposit accounts require account holders to deposit a particular amount every month instead of depositing a lump sum amount in one go

What are the Types of Recurring Deposit Accounts?

Following are the types of recurring deposit accounts that a user can invest in-

Types of Recurring Deposit AccountMeaning
Regular recurring deposit accountFor users above the age of 18 years with a regular source of income
Users can earn competitive interest on the deposited amount
Interest rates depend upon the chosen tenure and the amount deposited
Recurring deposit account for minorsFor minors who are below the age of 18 years
The account can be opened by the minor’s guardian/parents
Recurring deposit account for NRIFor NRIs banks offer a good interest rate on such types of RDs
Recurring deposit accounts for senior citizensFor senior citizens
Banks offer higher interest rates

How to Open a Recurring Deposit Account Online?

To open a recurring deposit account online, the following are the steps that are required to be taken by the user-

  • Login to the banking mobile application
  • Navigate to ‘Open recurring deposit account option’, ‘investment option’ or any other option that is related to opening a recurring deposit account
  • Enter the amount to be deposited, select the tenure and the type of recurring deposit account
  • Enter the date to deduct the amount every month
  • Click on ‘proceed’ or ‘submit’

How to Open a Recurring Deposit Account Offline?

Following are the options to open a recurring deposit offline-

  • Visit your nearest bank branch
  • Connect with the banking official and fill the recurring deposit account form and mention all the details like the amount to be deposited every month, the type of recurring deposit account to invest in, tenure, nominee, etc.
  • Submit the recurring deposit account application form and the deposit amount
  • The banking official will process your recurring deposit account application

What is a Fixed Deposit Account?

Fixed deposits are known as ‘term deposits’ or ‘time deposits’. It is an investment instrument service offered by banks and Non-banking financial companies (NBFC). It is considered one of the most secure options out of many others to save for the future. FDs allow users to deposit a lump sum amount for a particular time period on which interest is provided to the individual either monthly, quarterly or after maturity. In addition to this, FD provides the users with a lot of other features such as-

  • Customers can earn interest on the deposited amount for the pre-decided tenure
  • The rate of interest once locked remains unaffected by any changes in market or interest rates
  • Customers are given the choice to earn interest either periodically or at the time of FD maturity
  • A fixed deposit amount cannot be pulled before the maturity date and if in case, someone wants to withdraw the amount, he/she is required to pay a penalty for it

What are the Key Features of Fixed Deposits

Listed below are all the features of fixed deposits that you should know before investing in them-

  • A lump sum amount has to be paid in one go for the fixed deposit account. The additional amount can be added as a new deposit
  • Fixed deposits offer guaranteed returns
  • The depositor can earn interest monthly, quarterly, annually or after the maturity date
  • Fixed deposits have low liquidity as an investment option
  • Fixed deposit holders are offered a higher rate of interest in comparison to most investment options
  • The returns on deposits never get fluctuated by the market
  • Customers cannot withdraw the amount from the fixed deposit account before the maturity date. In case of emergency withdrawal or willful amount withdrawal, the amount can be pulled with a penalty to be paid
  • Customers can reinvest the fixed deposit amount after maturity
  • There is no cap on the maximum limit of the amount that can be deposited

What are the Types of Fixed Deposits

The types of fixed deposits are-

Type of fixed depositsExplanation
Cumulative Fixed DepositInterest is only available at the time of maturity
Users are not eligible for interval-based interest
Higher interest rate
Suitable for people who are not looking for regular interest payment
FD tenure ranges from 1 year to 5 year
Non-Cumulative Fixed DepositInterest provided at regular intervals
FD tenure ranges from 1 to 5 years
In case of regular interest payout, one will be eligible for a decreased amount at the time of maturity
Suitable for people who need regular income in the form of interest
Bank depositsOffered by banks to customers with saving accounts
The rate of interest is lower than the rates offered by non-banking financial companies
Company depositsOffered by NBFCs with a higher rate of interest
For companies with good creditworthiness
Senior citizen FDFor people above 60 years of age
Offers higher rate of interest as compared to other FDs
Flexible tenure
NRIs FDsApplicable for NRIs, OCI, PIO with NRO accounts
Higher rate of interest as compared to traditional saving accounts
Fixed tenure
Payment mode- NEFT/RTGS from NRO bank account
Regular FDsRegular form of investment
User can invest the amount for a particular time period
A predetermined rate of interest is offered
High interest rate
Tax saving FDsOffered by a major number of banks
Tax exemption up to Rs. 1.5 lakh annually
Lock in period of 5 years, before that, the amount cannot be withdrawn
One time lump sum amount deposit
Standard FDsFixed tenure
Predetermined rate of interest
Tenure starts from 7 days to 10 years
Higher interest rates as compared to saving account

How to Open an FD account online?

Following are the steps to open an FD online-

  • Login to the bank’s net banking platform
  • Visit the fixed deposit section on the portal
  • Fill in all the required information and click on ‘Submit’
  • In case you are opening an FD account with the existing bank, you will not be asked to do the KYC again as the bank will already have your details
  • Alternatively, if you are opening an FD with a new bank, be handy with all the necessary KYC documents and a passport size photograph

How to Open an FD account offline?

To open an FD account offline-

  • Visit the bank’s branch and fill the application form along with all the necessary details required
  • Once done, submit the form to the concerned official
  • Deposit the deposit amount and collect the deposit receipt
  • To open an FD account with a new bank, it is advised to connect with the official who can guide you about the complete FD creation process. Apart from that, carry all the KYC documents and a passport size photograph for the completion of the FD account process

Conclusion

The above-mentioned differences, features, process has defined the difference between fixed deposit and recurring deposit. A fixed deposit account is a great option for those who want to lock a particular amount of money for a fixed tenure, whereas recurring deposits are an option for those who have a regular source of income. Though the differences between them are many, the purpose of such accounts is to encourage the saving habits of an individual. Hence, choosing one over the other should be done by comparing the services offered by different banks, interest rates, lock-in period along with the individual goal to achieve and personal requirements.

FAQs
What is the tenure for a fixed deposit account?
The tenure for a fixed deposit starts from 7 days to 10 years. Though, the duration might vary from one bank to another.
What are the types of fixed deposit accounts?
The types of fixed deposit account are Cumulative fixed deposit, non-cumulative fixed deposit, bank deposits, company deposits, senior citizen FD, NRIs FDs, regular FDs, standard FDs, tax-saving FDs.
Can I open an RD online?
Yes, banks generally offer the feature to open RD online through their mobile banking application or net banking service.
Who can open a fixed deposit account?
Anyone with an active bank account can open an FD online or offline.
Can I open RD?
A person with a regular source of income (as the amount is required to be deposited every month) can open an RD with the bank.
How much interest will I get on an FD?
The interest rate offered by banks varies, hence, it is advised to compare the interest rate offered by different banks.
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