How Does Your Fixed Deposit Work?

byPriyanka JuyalLast Updated: January 27, 2023
How does fixed deposits work?
How does fixed deposits work?

Fixed deposits with a desired lock-in period are a popular way for people to save money for the future. Some banks offer their customers the option to create fixed deposits with a lock-in period as short as 7-9 days, which can last for up to 10 years. After the maturity period, the funds can still be deposited for a specified time. However, it’s important to note that withdrawing the funds before the maturity period can 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?

A fixed deposit is a savings or investment account offered by banks and other financial institutions. Customers who open a fixed deposit account can deposit a certain amount of money for a specific period of time, known as the term of the deposit. In return for keeping their money in the account for the agreed-upon term, customers earn a higher interest rate than they would with a regular savings account. Upon maturity, the customer receives the original deposit plus the accumulated interest. 

Fixed deposit accounts typically have minimum deposit requirements and minimum terms, and the interest rate is often higher for longer-term deposits. Some banks may allow customers to withdraw funds from a fixed deposit before the term ends, but this typically incurs a penalty. Fixed deposits offer customers a relatively low-risk way to save money and earn a higher return on their savings.

When a fixed deposit reaches maturity, the bank will credit the customer’s bank account with the entire amount, including any interest that has accumulated. It’s important to keep the following things in mind when considering a fixed deposit:

  • It is important to understand the different types of fixed deposits available before making an investment.
  • Customers can use a fixed deposit 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

Also Read: Short Term FD Vs Long Term FD


Can I open an FD online?

Yes, many banks and financial institutions offer the option to open a fixed deposit account online. This can be a convenient way to open an account, as it allows you to do so from the comfort of your own home or office.

What is the minimum amount to be deposited to open FD?

The minimum amount required to open a fixed deposit account varies depending on the bank and the specific terms of the deposit. Some banks may have a minimum deposit requirement of as little as Rs.100 or less, while others may require a higher amount.

What is the interest rate offered by banks on FD?

The interest rate on a fixed deposit varies depending on the bank and the specific terms of the deposit. It is typically higher than the rate on a regular savings account and may be higher for longer-term deposits.

Who can create FD?

Most banks and financial institutions offer fixed deposit accounts, and they are typically available to both individuals and businesses.

Can I open a fixed deposit account by visiting the bank?

Yes, users can open a fixed deposit account by visiting the bank, submitting the required documents, depositing the required amount, and meeting other requirements.

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