How to make the best use of Deposit Accounts?

Fixed Deposits are an essential link in India’s retail financial services chain and form an integral part of deposits with banks. Most investors like these accounts for their fixed returns and ease of use. You can invest in them without fearing losing your money or market fluctuations.

All Fixed Deposit has received Insurance up to Rs. 5 lakh, thanks to the Deposit Insurance and Credit Guarantee Corporation Bill, 2021. It guarantees each depositor a maximum of Rs. 5 lakh in case of bank liquidation. You can liquidate your money at the end of the tenure with interest. Here is how to make the best use of it:

Returns vs safety

The two factors that an investor should consider when choosing a Deposit Account are the interest rate and the sound financial health of the bank. If the interest rate is high, you get assured savings and returns throughout the tenure chosen. The Deposit Account terms vary from seven days to 10 years. You can select the investment duration depending on the requirements and financial goals.

Guaranteed returns

Though the returns are lesser than market-linked instruments, they are stable and guaranteed. The returns remain suitable for investors in certain circumstances. For example, for young investors, such as students or first-time employees, Fixed Deposits are a good starting point as they help build the habit of saving. As a new investor, you can take the first steps into the investment horizon with a Term or Recurring Deposit Account.

Financial goals

FDs also play a vital role in rebalancing your investment portfolio. If the financial goal is near, the investor should move funds from Mutual Fund schemes to these accounts and lock the money in for a specific tenure.

Emergency funds

Since you can manage an FD easily, you get fund flexibility. You can also pre-close and withdraw quickly in an emergency. Do not turn your back on them just yet. Study them for suitability to your needs and invest accordingly. You also get a Loan against the Deposit Account to fulfil immediate expenses.

Investment intervals

When you open a Term Deposit on the Banking app, you must invest the entire money in a lump sum. However, that is not the case with RDs. Here, you can deposit small amounts in regular intervals while earning interest.

Interest rates

The interest rate depends on the capital and tenure opted for. An FD Account has a slightly higher rate than an RD. Use a deposit calculator to see what investment amount suits you best. Accordingly, you can calculate the returns.

Tenure

Customers who opt for Fixed Deposits need to choose a tenure suiting their financial requirements. They must deposit an amount once. The interest on it gets credited to your account monthly or quarterly.

Meanwhile, in RDs, investors can deposit a fixed monthly amount and earn interest. You receive the interest along with the capital at maturity.

Keywords: Fixed Deposit, FD, FD Account