Savings are important for every individual. Your savings can help you deal with the worst financial situations, accidents or medical emergencies.
Investing a part of your income with the help of a tool that gives high returns and keeps your money safe is important. This is the reason why many people prefer a fixed deposit.
What is a Fixed Deposit?
A fixed deposit is a type of financial investment option, provided by banks or NBFCs, for depositing a part of your income to get a high-interest rate until the specified maturity date. Do check the interest-to-be-earned on an FD return calculator before investing to ensure your financial benefits.
One reason why many people prefer FD over normal savings account is that it offers a high rate of interest. Not just that, there are many other benefits of investing money in a fixed deposit account. The following are the five valid reasons why individuals must consider opening an FD account:
- Fixed deposit investments give assured returns: The fixed deposit investment offers assured returns to the investors; however, the returns may vary depending on the investment tenure. Besides, senior citizens are offered 0.25% higher interest rates on FDs. This means it’s a good investment option for the elderly as well. The CRISIL has also given FAAA/Negative rating to certain NBFCs, indicating higher safety assurance. Nonetheless, you have to ensure that you don’t break FD in-between, as it may affect the returns due to early or premature withdrawals.
- Nomination facility: The financial institutions also offer you an easy nomination facility on fixed deposits. This means if the depositor dies before the maturity of the FD, their outstanding balance will be transferred to the nominee’s account without any references of the legal representatives.
- Hassle-free investment: In case an individual already has a Savings Account, they can easily open an FD account with a few clicks on their Smartphone or by visiting their nearest bank or NBFC branch. The account holder can also set maturity instructions for automatic renewal or to receive maturity amount directly into their account. Nowadays, NBFCs also offer convenient doorstep services to their fixed deposit customers. This means the NBFC representatives will visit the customer’s residence or office for picking up the required documents.
- Premature Withdrawal: While it is recommended not to break FD until the maturity period, the banks and NBFCs do offer premature withdrawal option to depositors. But they can only make a premature withdrawal after the three months of the date of deposit. The depositors who withdraw money within six months from the deposit date will only be paid 4% interest per annum.
- Loan Facility & No TDS deduction: The investors can also get a loan against their fixed deposit, which can be up to 75% of the total principal amount. However, this loan draws a 2% higher current FD ratesthan the maximum FD interest rate. Furthermore, if you have deposited INR 5,000 in your FD account, there will be no TDS deduction on the interest earned in a given financial year.
As they say, “Don’t wait for better Investment options, Invest and then wait for a better time.” So, make a smart investment move by depositing your money in FDs.