Fixed Deposits.

Money Matters - Fixed Deposits.

A fixed deposit is a good way to save money. Fixed deposits offer more interest than a savings bank account. Unlike savings account, a fixed deposit is not for transactions: it is meant only for saving. A fixed deposit (FD) could be an individual account or a joint account. It has an account number and a tenure. The account number is valid only till the tenure ends, which is the date of maturity.

In FD account, three things will remain fixed; they won't change. They are:

1. The FD amount.
2. The tenure or maturity date. (If FD account is closed prematurely, the maturity benefit will get diluted).
3. The promised returns.

Fixed Deposits don't require any attention from the depositors which is convenient for them.

The Convenience of FD.

It is convenient to save money in FD as only a single deposit has to be made. Opening FD is easy. If you have a savings bank account, then opening FD is simple. You can open FD through net banking, which just requires a few clicks. You can create FD account by selecting tenure and amount. Once you do it, you can view your account which will show all details about the booked FD, including the rate of interest, maturity date and the maturity amount.

Interest Rates in FD.

Fixed Deposits offer returns above 5% which is good in comparison to savings bank account. Although the rate of interest has gone down over the years, it is still reasonable. The rate of interest at present is between 5% to 5.5%. (See Deposit Rates of major Banks*). Earlier, it used to be around 7%. This was the rate of interest which banks used to provide. Senior citizens could get .50% more. There could be fluctuations in rate of interest in FD, as banks revise them from time to time.

Benefits of Fixed Deposit(s).

Fixed deposits have many benefits. FD helps people to develop financial discipline. FD is a positive way to save, because, as a feature, it discourages liquidation during the term. This would mean that the owner of an FD would have to search for alternate source of funds for his immediate needs of money if he wants to keep his deposit intact. In such scenarios, he would search for other options, if available or postpone the task, if possible, if he really wants the FD to mature.

A matured FD is an indication of financial discipline and so is beneficial for them who have it. FD is beneficial when more money is deposited in it. As fixed deposits are bona-fide accounts for saving, the account holder may get the facility of an overdraft which may be useful in an emergency.

Overdraft Facilities in FD.

Overdraft is a financial assistance which is given by a bank to an account holder against his deposits. This is more or less a kind of secured loan in which the deposits act as security. The account holder could get as much as 85% of his deposits as loan (overdraft). Sometimes, an overdraft could be better option than a personal loan. However, overdraft is practical only if FD is big and the tenure is long.

Overdrafts could also be availed online. Net banking facilities of most banks provide overdrafts to customers who fulfil their specified criteria. Bank apps, if installed in a mobile device can also be used for this.

Some Points to Consider.

The following points are worth considering:

(1) Make one FD: Make at least one fixed deposit. Even one FD will be useful. You can make multiple FD's also if you can afford them. It will help in saving your money further.

(2) Don't over invest in FD: Don't put your entire money in FD. As your money gets locked in FD, it is better to diversify your savings. It is advisable to put 10% of your annual income in FD.

(3) Make FD for higher investments: Properly planned FD could be used for even higher savings like life insurance. FD, when planned meticulously, has the potential to grow for higher investments.

(4) Don't close FD before maturity: Don't withdraw or close your FD prematurely. Maturity amount is the main attraction in FD. There is no point in opening FD if it is closed before maturity.

(5) Go for short tenure: FD with long tenure is good for returns and for getting an overdraft, but it could also lead to premature closure. Longer tenure could compel an account holder to withdraw or close his FD prematurely if he has no other account to liquidate in an emergency. Don't go for too lengthy tenure in FD if the amount is less.

(6) Grow FD consistently: Grow your FD slowly, but consistently. FD is a time consuming instrument for saving. It grows by its own pace.

(7) Plan your FD: Plan your Fixed Deposits carefully. Decide how much money could be deposited in FD without strain. As FD requires much discipline and planning, people who don't have it, may find it disappointing.

Fixed deposit is a good way to save and better interest rate makes it useful. FD could be a building block for our financial structure and it can contribute a lot towards our long term saving goals. It can contribute to higher investments. Even a small FD can make a difference in savings. It helps in conserving money and creating funds for future.

.....................

*Deposit Rates of Major Banks.

Interest rates on retail domestic term deposits of three leading banks in India are given below.

State Bank of India: Interest Rates on Retail Domestic Term Deposit below 2 Crore.

• 7 days to 45 days: 2.90%. For Senior Citizens: 3.40%.
• 46 days to 179 days: 3.90%. For Senior Citizens: 4.40%.
• 180 days to 210 days: 4.40%. For Senior Citizens: 4.90%.
• 211 days to less than 1 year: 4.40%. For Senior Citizens: 4.90%.
• 1 year to less than 2 years: 5.10%. For Senior Citizens: 5.60%.
• 2 years to less than 3 years: 5.20%. For Senior Citizens: 5.70%.
• 3 years to less than 5 years: 5.45%. For Senior Citizens: 5.95%.
• 5 years to 10 years: 5.50%. For Senior Citizens: 6.30%.

Bank of Baroda: Term Deposit interest rates for less than 2 Crores.

• 7 days to 14 days: 2.80%. For Senior Citizens: 3.30%.
• 15 days to 45 days: 2.80%. For Senior Citizens: 3.30%.
• 46 days to 90 days: 3.70%. For Senior Citizens: 4.20%.
• 91 days to 180 days: 3.70%. For Senior Citizens: 4.20%.
• 181 days to 270 days: 4.30%. For Senior Citizens: 4.80%.
• 271 days to less than 1 year: 4.40%. For Senior Citizens: 4.90%.
• 1 year: 5.00%. For Senior Citizens: 5.50%.
• 1 year to 400 days: 5.20%. For Senior Citizens: 5.70%.
• 400 days to 2 years: 5.20%. For Senior Citizens: 5.70%.
• 2 years to 3 years: 5.20%. For Senior Citizens: 5.70%.
• 3 years to 5 years: 5.35%. For Senior Citizens: 6.00%.
• 5 years to 10 years: 5.35%. For Senior Citizens: 6.35%.

Punjab National Bank: Interest Rates for Term Deposits of less than 2 Crores.

• 7 days to 14 days: 2.90%. For Senior Citizens: 3.40%.
• 15 days to 29 days: 2.90%. For Senior Citizens: 3.40%.
• 30 days to 45 days: 2.90%. For Senior Citizens: 3.40%.
• 46 days to 90 days: 3.25%. For Senior Citizens: 3.75%.
• 91 days to 179 days: 3.80%. For Senior Citizens: 4.30%.
• 180 days to 270 days: 4.40%. For Senior Citizens: 4.90%.
• 271 days to 1 year: 4.40%. For Senior Citizens: 4.90%.
• 1 year: 5.00%. For Senior Citizens: 5.50%.
• 1 to 2 years: 5.00%. For Senior Citizens: 5.50%.
• 2 to 3 years: 5.10%. For Senior Citizens: 5.60%.
• 3 to 5 years: 5.25%. For Senior Citizens: 5.75%.
• 5 to 10 years: 5.25%. For Senior Citizens: 5.75%.

............................

See post with the label "Savings".

............................

[<<]IIIII[>>]