Why FDs are Better than Savings Account?

July 17, 2020 2:40 am34 commentsViews: 74

Intelligently managing your finances is easier said than done. With a lot of investment options available in the market, finding the right investment option can be difficult. Financial investments are tailored depending on your spending habits, wants, and goals; however, there are some financial instruments that are beneficial for everyone. Having a saving account to park your excess funds is a good option, but if you want to get better returns and save tax, a saving account won’t be enough. This is where opening a Fixed Deposit can help you out. One of the smartest investment choices, here are some of the reasons why FDs are considered better than savings accounts.

Why People invest in FD?

There are abundant savings options, so why are FDs considered the smartest choice for investment? This is a common question that a lot of investors have in their minds. There are several reasons why holding money in an FD is a smarter option than opening a savings account. Some of the benefits of investing in FD are:

  • Higher Interest Rate- Savings account also accrues interest but the percentage is lesser than an FD. The interest rates offered on FDs are much higher than those offered on your savings account.
  • Doesn’t get affected by market fluctuations- The returns that you get from opening an FD are not subject to market fluctuations. As a result, you will get the same rate of interest that was promised when you were opening the account.
  • Better Returns for Senior Citizens- Savings account offers the same rate of interest for all age groups. However, when it comes to fixed deposits, senior citizens can get a higher rate of interest.
  • Tax Saving- Every year you need to make some investment declaration to avoid deduction. A lot of people are unaware of the fact that investing in a fixed deposit can help you save tax. FDs help you save tax with their tax-saving schemes.
  • Periodic Interest Payouts- Fixed deposits help you earn periodic interest rates, which make it easy to plan your expenses. The periodic interest rates are very beneficial for senior citizens during the post-retirement years when they need monthly income for meeting regular expenses. This facility is not available in savings accounts.

Points to Consider when Investing in FD

However, before opening a fixed deposit account, there are certain important points to consider. Read on to find out.

Tenure

When you open a fixed deposit account, your money will be locked-in for a certain period. Depending on your financial goals, preferences and requirement, you can choose a lock-in period between 1 to 10 years.

Tax Deducted at Source

The interest that you receive on the fixed deposit is fully taxable depending on your Income Tax slabs. For instance, if the interest earned in a year is more than Rs. 10,000, the bank will deduct TDS. Make sure you get all the information about the TDS before deciding the amount of money you want to save in the FD account.

Minimum Deposit Amount-

The minimum and maximum amount that can be deposited vary in every bank. It is advisable to check the minimum and maximum limit of the FDs before opening an account. For instance, the minimum amount for FD booking in IndusInd Bank is Rs. 10,000.

Auto-Renewal

Most of the banks will renew the FD automatically every year till the maturity date or you give any specific instructions. You can either choose automatic renewal or opt-out of it by mentioning in same in the FD form.


Premature Withdrawal Penalty


If you have a financial emergency, you can withdraw your FD before the maturity date. However, the bank will levy a penalty when you withdraw the funds before the maturity date. Check the rules related to premature withdrawals when opening your FD account.                                                                                                                                                                                                                                                                 

Conclusion

One of the safest and profitable investment options, fixed deposits also helps you develop your saving habit. However, do check all the terms and conditions before making the final decision. If you are planning to open a fixed deposit account, check out the options provided by IndusInd Bank. Higher interest rates, online application, auto-renewal facility, flexible tenures are some of the advantages of opening an FD account with IndusInd Bank. Find out more about the FD account here.

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