A fixed deposit generally known as FD is a financial instrument that the banks provide their customers in which the investors are offered a higher interest rate than the regular savings account provides until the date of maturity. This type of deposit need not require any creation of a new account.
In this world which is totally governed by money and profits, it is better to go options like fixed deposit rather than the classic savings bank account. The general dilemma of the public is how much interest will be gained by fixed deposit account, how will the interest be calculated and it is difficult for them to calculate interest thus fixed deposits are too hectic to open and maintain. The basic differences between a fixed deposit and savings bank account are:
|Fixed Deposit||Savings Bank Account|
|The amount deposited in the fixed deposit is at many times regulated by the banks offering them.||The amount deposited in the savings bank accounts is unlimited.|
|The rate percentage of the fixed deposit is constant for the whole term till maturity.||The rate percentage is not constant for the savings bank account for the whole term.|
|The fixed deposit has tenure ranging from 7 days to 10 years.||The saving deposit has no fixed tenure.|
|The interest is calculated quarterly.||The interest is calculated every day.|
|Interest rates are dependent on the period for which the sum is to be assured.||The interest rates are independent of the period for which the sum is to be assured or deposited.|
|These accounts don’t offer senior citizen with special offers.||These accounts offer senior citizen with special offers.|
|These systems offer ways of tax saving.||These do not have options for tax savings.|
Other than these the fixed deposits and savings bank account have a few other minute differences which are as follows:
- The fixed deposits have various types which the savings bank account doesn’t have.
- The fixed deposit can be used to secure loans.
- The savings bank account unlike the fixed deposit doesn’t have lock-in periods.
If someone wants to go for a fixed deposit or a savings bank account that is his personal choice but here are few points where it is mentioned that why FD is much better than savings bank account for investment:
- When a person has a lot of money which he has no definitive or emergent need of in the coming future then he should use his mind innovatively and invest in short term fixed deposits which would give him much more benefit than his money resting without any much use in the savings account.
- The FD offers much higher interest rates than what is being offered on the savings bank accounts hence going for a fixed deposit is a much better option for investing your money and a better way to earn profits. You can easily find FD rates across banks using an FD calculator.
- For senior citizens, there are better options for interest rates and thus extra benefits in case anyone invests money and wants to earn benefits from it.
- A person in need of just a little more money than he already has may invest in fixed deposit and earn that money in a much shorter time period than savings bank account.
- If the investor wants to keep his credit history clean then he may invest in a fixed deposit and keep that as collateral if he applies for a loan.
- There are also benefits awarded to a person having fixed deposit if he applies for credit card as many banks offer him/her lower interest rates.