To protect your hard-earned money, a variety of investment options are available in the market these days. Some people invest in stocks for quick profits, while for others, long-term investment schemes like bank FDs and RDs are considered better options. Today, we’ll explore fixed deposits (FDs) and recurring deposits (RDs), their features, and which option will be best for you in which circumstances. FD i.e. Fixed Deposit is an investment option in which you deposit a large amount of money in the bank at one go and let it remain there for a fixed period. During this time, the bank gives you a fixed interest rate, due to which you get guaranteed returns.
Which is better for you?
You can choose the term of an FD based on your needs. It can range from 7 days to 10 years. Upon maturity, you get your entire money back, including interest. This is why FDs are considered a low-risk and safe investment. Fixed deposits are still a popular choice among many because they offer fixed and guaranteed returns. Their tenure is also very flexible; you can invest for a period ranging from just 7 days to 10 years. This is a risk-free investment, ensuring your money remains safe. FDs also offer multiple interest options; you can choose to receive interest monthly, quarterly, or upon maturity. Additionally, tax-saving FDs with a 5-year lock-in period are a good option for those planning to save money. If needed, you can also take a loan against the FD. However, keep in mind that premature withdrawals may incur penalties.
What is RD?
RD is an excellent investment option for those who want to save a small amount every month and earn a fixed return. You deposit a fixed amount into the bank each month, and when the term of the scheme ends, you receive interest on your deposit plus the capital. This is a particularly good option for those who don’t have a large lump sum at once but want to save with discipline. The term of an RD can range from 6 months to 10 years. The interest rate is fixed and similar to that of an FD. It is also considered a safe and risk-free investment. However, if you close your RD before maturity, you will receive lower interest and may also incur a penalty. Both FDs and RDs are considered safe investments and offer fixed returns. Interest earned on both investments is taxable. If you wish, you can add a nominee to both schemes so that your family can easily access the funds in the event of an unforeseen event. Both schemes may incur penalties if you withdraw the funds before the required amount. In an FD, you deposit a large sum once, and interest accrues on the entire amount.
In an RD, you make small monthly investments, and the interest increases as the deposit grows. In an FD, you can receive interest monthly or quarterly, whereas in an RD, interest and the deposit amount are usually received only upon maturity. You can reinvest in an FD after maturity, but it’s important to maintain a regular RD.