Important things to Know about Fixed Deposit and Recurring Deposit

Important things to Know about Fixed Deposit and Recurring Deposit

Are you still worried which deposit is a better investment for you? If yes then we are going to make you aware about the facts and details about both the deposit methods. Deposit is a kind of investment you do for a certain period of time and it involves interest. Before moving any further there is one thing you must know and it is about the interest. No matter what deposit method you chose, you will receive the return for sure.

Now let’s know about these deposit systems:

FD or Fixed Deposit

FD or Fixed Deposit allows the customer to deposit their money at a single time. Fixed deposit method is best for the farmers, small traders and Businessmen as their income is irregular and the amount is somewhat lump sum.

Example: Depositing fifty thousand Rupees at once for the period of one year. This is known as fixed deposit investment.

As far as the investment amount is concerned, fixed deposit account opens at Rs 1000 and there is no maximum limit as such. But in case if you are dealing with more than 5 crores then you are not going to receive desired interest rate.

Maturity amount and investment rate also plays an important role while selecting deposit scheme. And the rate of interest is same for both Fixed deposit scheme and Recurring deposit scheme. However,

Fixed deposit gives more Maturity amount as compared to Recurring deposit.

Apart from these there are some other criteria that should be considered and are follows:

• ·       The tenure period for the FD is 7 days to 10 years.
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• ·       If you go for pre-mature withdrawal and assume you have a FD of more than Rs 5 lakh then the pre mature withdrawal will be around 1% less interest rate

RD or Recurring Deposit

RD or Recurring Deposit allows the customer to deposit their money or certain amount at regular intervals. Recurring Deposit scheme is best for the regular income groups like Office employees and workers.

Example: You need to invest a fixed amount at every interval like you put 1000 Rs every month in your deposit account for a period of 2 years.  . This is known as Recurring deposit investment.

As far as the investment amount is concerned, fixed deposit account opens at Rs 100 and there is no maximum limit as such.

Talking about the Maturity amount and investment rate basically, the rate of interest is same for both Fixed deposit scheme and Recurring deposit scheme. However, Recurring deposit gives less Maturity amount as compared to fixed deposit. And the reason is every time you deposit the amount there happens to be a different tenure for that particular installment so the interest gets lesser at every succeeding interval and resulting in less maturity rate.

Apart from these there are some other criteria that should be considered and are follows:

• ·       The tenure period for the FD is 1 year to 10 years.
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• ·       If you go for pre-mature withdrawal and assume you have a FD of more than Rs 5 lakh then the pre mature withdrawal will be around 1% less interest rate same as fixed deposit.

Both the schemes work for different purposes. Like RD can better used for Children Higher education and marriage.  On the other hand Fixed Deposit is useful for those with bigger amounts like traders. You are the better person to judge which scheme suits your requirement.