Bank FDs provide you with the safety of your investments. These deposits are highly secure, and you are assured of the principal and interest on maturity.
Depositors are divided into two categories according to age: one below 60 and the other above 60. The customers in the latter category, are the senior citizens. The FD rates for senior citizens are higher than those for regular customers. However, apart from a higher interest rate earned by senior citizens, fixed deposits remain an attractive option for all depositors.
Factors That Make Fixed Deposits an Attractive Option
For investors looking at the safety of principal and regular income, fixed deposits are an attractive investment option. There are a lot of features that FDs offer apart from security of your investment and returns. These features are mentioned below:
Assured Income with Fixed Interest Rate
If you require a regular monthly income, then you can choose the monthly interest payout option for your FD. The interest will be credited to your savings account, and you can withdraw it whenever you want.
However, the rate of return would depend on the amount invested, tenure, and depositor’s age.
Banks offer attractive rates of interest for depositors below the age of 60 as well as senior citizens.
The FD interest rates for senior citizens are 0.5% higher than that offered to normal customers.
For regular deposits up to Rs. 5 crores, the tenure varies from 12 months to 120 months. The interest rate varies from 8.30% for the 12-month FD to 8.25% for the 120-month FD for regular deposits. These are for the cumulative option.
For the non-cumulative option, the rates for monthly interest in the 12-month FD would be 8%, while the annual rate is 8.3%.
There are special deposits (over Rs. 5 crores) with tenures varying from 15 to 44 months. The rates vary from 8.3% per annum for 15-month deposits to 8.45% for 44-month deposits.
As you can see, the interest rate depends on the fixed deposit tenure.
The flexibility of tenure and interest earned
Fixed deposit tenures vary from 7 days to 10 years. You can choose the tenure which works best for you. As they offer higher rates than savings accounts, you can keep your idle funds in fixed deposits.
Additionally, the interest you earn can be both cumulative and non-cumulative.
- Under the cumulative option, interest is compounded annually on the 31st of March every year.
- Under the non-cumulative option, the interest is paid out to the customer at various frequencies. You could opt for the annual, half-yearly, quarterly or monthly payout FD.
With this facility, the funds above a pre-decided account is transferred to the fixed deposit account from the savings account, and you will earn higher interest rates.
In the end, Bank FDs are a great option for those who are retired or have a low-risk appetite and are looking for stable returns. They are highly recommended for people of all age groups.