Flexi Fixed Deposits are a modern and dynamic savings solution revolutionizing the way we grow our money. As the economic landscape evolves, so do the needs of individuals seeking flexible and convenient investment options that strike a perfect balance between growth potential and liquidity.
In this blog, we will learn about what is a fixed deposit, its features and advantages, how they are different from regular deposits, and which banks offer the facility of these deposits.
What is a Flexi Fixed Deposit?
A Flexi Fixed Deposit, also known as a Flexible Fixed Deposit, is a financial product offered by banks that combines the features of both a fixed deposit and a savings account. It provides account holders with greater flexibility and liquidity while earning a higher interest rate compared to a regular savings account.
Here are the key features of a Flexi Fixed Deposit:
- Fixed deposit component: When you open a Flexi Fixed Deposit, you deposit a lump sum of money for a specific tenure at a predetermined interest rate, just like a traditional fixed deposit.
- Savings account component: In addition to the fixed deposit, you also have a linked savings account with the same bank.
- Automatic sweeping: The bank offers you the convenience of automatically “sweeping” or transferring any surplus funds from your savings account into the fixed deposit component. This helps you earn higher interest on the surplus funds, typically higher than what you would earn in a regular savings account.
- Withdrawals: If you need to access the money you’ve put into the fixed deposit component, you can do so without breaking the entire deposit. The bank allows you to break only the necessary portion of the fixed deposit, leaving the rest of your deposit intact. This is useful for managing unexpected expenses or liquidity needs.
- Interest calculation: Interest is usually calculated on a daily or monthly basis, and it varies based on the amount swept into the fixed deposit and the tenure of the deposit. The more money you sweep into the fixed deposit and the longer the tenure, the higher the interest you’ll earn.
Also Read: Benefits of Loan Against Fixed Deposit
Features and Advantages of Flexi Fixed Deposits
Flexi Fixed Deposits provide a range of features and benefits to account holders, some of which are outlined below:
- Attractive interest rates: Flexi Fixed Deposits offer higher interest rates compared to regular Savings Accounts, enabling individuals to maximize their earnings.
- Flexible tenures: Different banks provide various tenure options for flexi deposit schemes, ensuring customers can choose the duration that best suits their financial requirements.
- Customizable investment amount: Individuals have the flexibility to select the amount they wish to deposit, with different banks accommodating varying deposit sizes.
- Premature withdrawal option: In most cases, banks permit premature withdrawals from flexi fixed deposit accounts, subject to the specific policies in place.
- Loan facility: Account holders can typically avail loans against their flexi fixed deposits, based on the specific policies implemented by the banks.
- Easy account opening: Opening a Flexi Fixed Deposit account is a simple and hassle-free process, with most banks following a quick and transparent approach.
- Auto-renewal feature: Banks generally offer the option of auto-renewal for flexi FDs, ensuring account holders don’t have to be concerned about the renewal process.
How are Flexi Fixed Deposits Different From Regular Fixed Deposits?
Flexi Fixed Deposits and Regular Fixed Deposits are both types of savings and investment instruments offered by banks, but they differ in several key ways:
- Flexi Fixed Deposits: These offer more flexibility. You can deposit and withdraw funds from the linked savings account as needed, and the surplus funds are automatically swept into the fixed deposit component. This allows you to maintain liquidity while earning higher interest on the surplus.
- Regular Fixed Deposits: These are less flexible. Once you invest a lump sum for a specific tenure, you cannot withdraw funds or add to the deposit until the maturity date. They are better suited for long-term savings.
- Interest Rates:
- Flexi Fixed Deposits: Typically offer higher interest rates on the swept-in funds compared to a regular savings account but may have slightly lower rates than traditional fixed deposits.
- Regular Fixed Deposits: Offer fixed interest rates for the entire tenure, which may be higher than Flexi Fixed Deposits or regular savings accounts.
- Account Structure:
- Flexi Fixed Deposits: Usually involve the creation of a separate account that combines elements of both a savings account and a fixed deposit account.
- Regular Fixed Deposits: Operate as standalone fixed deposit accounts.
- Flexi Fixed Deposits: Allow you to withdraw funds from the linked savings account as needed without breaking the entire fixed deposit.
- Regular Fixed Deposits: Do not allow withdrawals before maturity without incurring penalties or breaking the deposit.
- Flexi Fixed Deposits: May have a minimum tenure requirement, but the flexibility to move funds in and out provides some control over the tenure.
- Regular Fixed Deposits: Have fixed tenures chosen at the time of deposit, such as 1 year, 3 years, 5 years, etc.
- Interest Calculation:
- Flexi Fixed Deposits: Interest is typically calculated on a daily or monthly basis and varies based on the amount swept into the fixed deposit and the tenure.
- Regular Fixed Deposits: Interest is fixed and calculated based on the initial deposit and the agreed-upon interest rate.
Flexi Fixed Deposits represent a versatile financial tool that bridges the gap between the liquidity of a savings account and the higher interest rates typically associated with fixed deposits. These accounts provide account holders with the flexibility to manage their funds effectively, allowing for easy withdrawals and automatic sweeping of surplus funds into the fixed deposit component. While they may offer slightly lower interest rates compared to traditional fixed deposits, the convenience and accessibility they offer make them a valuable option for individuals seeking a balance between security and liquidity in their savings and investment portfolio.