Monday, July 22, 2024
HomeInvestmentAdvantages and Disadvantages of Fixed Deposit Account

Advantages and Disadvantages of Fixed Deposit Account

Fixed deposits are one of the safer investment options, epically in India there are both advantages and disadvantages of fixed deposit account. Most people in India consider the fixed deposit the most secured and less risky investment plan, giving them an interest in their savings over time. They can use the interest earned in the deposited amount to meet the requirements of a person.

Fixed deposits are considered a secure way of increasing your capital. There are many advantages and disadvantages of fixed deposit account. In this article we will discuss the advantages of fixed deposit and features of Fixed deposits account.

As the features of fixed deposit account,  the amount which an investors deposit gets blocked for a while. The investor is free to decide the tenure of the fixed deposit can be of several days, several months to several years. Under the return features of fixed deposit account, the institution pays the depositor a certain amount of interest.

 After the advancement of technology, opening a fixed deposit account in your bank is relatively straightforward nowadays. The opening and investing can be done online and offline too. But the capital gets increased in other investing areas, and the money is not barred from use, so why are fixed deposits most considered by people, especially in the Indian Mindset? Lets talk about the advantages and disadvantages of fixed deposit account.

Advantages of Fixed Deposit

A fixed deposit is highly beneficial for people who want to keep aside money for some time and also get a chance to gain good interest. However, the interest rate earned on FDs is lower than other investment options. Still, people prefer Fixed deposits due to the following advantages:

1. Assured Return on Investment

In this advantages of fixed deposit, the amount of return you get on a fixed deposit is free from market volatility. Like in the case of shares, the amount of profit you book depends on your skills and experience, but in the case of fixed deposits, you get an assured interest on your deposits without doing anything. Different banks offer different interest rates on their fixed deposits, but the difference between them is minimal.

2. A Tax Threshold

The bank is not liable to cut any taxes from the depositor’s interest until the total interest earned on the fixed deposits account is more than ten thousand. This gives a sense of comfort to small depositors and ordinary people.

3. Tenure Flexibility

The depositor is free to choose the tenure for the barring of the deposited money. However, some institutions have set the minimum term on fixed deposits, but the final decision will be of the depositor only. This is also one of the features of fixed deposit account.

4. Loans

Another advantages of fixed deposit account and the features of fixed deposit account is that the depositor can take loans against the fixed deposit up to 95%of the deposited capital, depending upon your bank.

Disadvantages of Fixed Deposit 

We have already discussed the advantages of Fixed deposits, but as with everything, Fixed Deposits also have a negative side. So, let’s look at some of the disadvantages of Fixed deposits.

1. Fixed Interest

It is considering the advantages of fixed deposit account of assured interest which is fixed. The interest rate doesn’t change between the tenure. It is as much as decided upon investing till maturity.

2. Funds are Locked in

The funds which you have deposited are locked till the maturity reaches. Although you can cancel your FD anytime but this will not provide you any interest rate. You will only get your actual principle amount in your account.

3. Reducing Interest Rates

The advantage of a fixed deposit account is assured and limited interest, but these interest rates are constantly decreasing. So the amount of interest you got a year back is far more than you get today.

Steps to Open Fixed Deposit Accounts 

The advantage fixed deposit account is that it can be opened both online and offline. So let’s view both processes.

  1. Select the bank or NBFC with whom you want to start your fixed deposit journey. Then, visit the branch of the bank/ NBFC  or surf their website for the option of fixed deposits.
  1. Fill in the desired details and attach the required documents like Identity proof, bank account details, etc.
  1. After verifying your KYC forms are filled, the bank/NBFC will create a fixed deposit account for you.

Conclusion 

Fixed deposit account features serve you in a better an efficient manner without any doubt. The most effective advantages of fixed deposit account are the assured interest on your savings and fixed deposits monthly income scheme provide more advantages. But like the coin has two faces, the fixed deposits accounts have some demerits too more précised the reducing interest rate demerit is a powerful one. 

If you have the knowledge of investing and the confidence to book profits, then definitely the fixed deposit is not an option for you but if you can’t do that, then fixed deposits are the safest and most secure option for you.  We hope you have understood the fixed deposit account features. 

Advantages and Disadvantages of Fixed Deposit Account – FAQs 

Why invest in fixed deposits and are the fixed deposit account features?

Ans. Fixed deposits are considered the best option if you want to increase your capital in a secure and risk-free manner.

Which bank has the highest interest on FD?

Ans. Currently, the State bank of India leads in this list with an interest rate of 2.9% to 5.65%. Along with   HDFC and IDBI with 2.75% to 6.1% and 2.7% to 5.75%, respectively.

Is NBFC a safer option for fixed deposits?

Yes, NBFCs are safer and registered under RBI-Banking Act, 1956. However, unlike banks, NBFC cannot accept demand deposits.

What is NBFC?

Ans. NBFCs are Non- banking financial companies registered under the RBI-Banking Act of 1956.

Are there any fixed deposit account features for automatic transfer to the saving account?

Ans. Yes, you can open the Fixed deposit account and link it directly to your savings account so that the amount can be directly transferred to your savings account at maturity.

What is the minimum amount that I can deposit on the FD account?

Ans. The Fixed deposit account can be opened in any bank with a minimum amount of Rs 500 for any duration. If you opt for a longer tenure and a larger amount, you will get higher interest on your principal amount.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Recent Posts

Most Popular