Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a certain sum of money is deposited in the bank for a specified time period with a fixed rate of interest. The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher in case of longer maturity period. There is great flexibility in maturity period and it ranges from 15days to 5 years. The interest can be compounded quaterly, half-yearly or annually and varies from bank to bank. Minimum deposit amount is Rs 1000/- and there is no upper limit. Loan / overdraft facility is available against bank fixed deposits. Premature withdrawal is permissible but it involves loss of interest.
Things to Remember Before Opening a FD Account
Before opening a fixed deposit account, check the financial position of
the bank. Also, try to check the rates of interest for different banks
for different periods. Instead of putting a big amount in one fixed
deposit, keep the amount in five or ten small deposits. This way, in
case of any premature withdrawal of partial amount, then only one or two
deposits may need to be prematurely encashed. Thus, the loss of interest
will be less than if a single big deposit were to be encashed. Check
deposit receipts carefully to ensure that all details have been properly
and accurately filled in. Do not leave the renewal column unfilled.
Otherwise, on maturity the fixed deposit amount will go back into an FD.
Before investing in a FD it is important to consider the rate of
interest and the inflation rate. A high inflation rate can eat into your
real returns. So, it is vital to have a look at the inflation rate
before arriving at the real rate of interest.
Advantages of Fixed Deposit