Fixed deposits, with the desired lock-in period, are one of the best ways to save money for the future. There are banks that offer their customers a 7-9 day lock-in period to create fixed deposits that last 5-10 years. After maturity, the amount can still be deposited for a specified time period. It should be noted, however, that withdrawing the funds before the maturity period may result in a penalty.
In this blog, we will learn how fixed deposits work and what steps should be taken before investing money in FDs.
How does Fixed Deposit work?
The amount invested in the fixed deposit account remains blocked for the predetermined period, in which a customer deposits an amount every month and receives interest on it. Banks give customers the option of investing for a period ranging from 7 days to 10 years. The amount can still be invested for the desired tenure after the maturity period. Customers are not permitted to withdraw the amount prior to maturity; however, withdrawing the amount prior to maturity due to any circumstance incurs a penalty that must be paid.
After FD maturity, the bank credits the entire amount along with the interest to the customer’s bank account. Further, It’s also a good idea to keep the following things in mind:
- It is critical to understand the type of FD to invest in
- Customers can use the FD calculator to determine the total interest that will be earned on the deposited amount
- The advantages of a fixed deposit
- The ability to deposit any amount