8 things to consider when opening a fixed deposit account

1. Duration of your deposit

FDs also come in a variety of terms, ranging from seven days to ten. This means that it includes the three categories of investments: short, medium and long term. Long-term investments normally last more than three years, the medium term is usually between one and three years, and the short term is usually less than one year. It also refers to a fixed term investment like a fixed deposit from a bank, NBFC or post office. The duration of an investment has a big impact on an investor’s perception of risk, and the duration is also determined by certain factors such as where and when you want to invest your money. Investing for your potential financial needs requires a lot of time and management skills. However, one example is setting your financial goals. Once they have been found, the next step is to determine the individual’s risk appetite and investment goals. The purpose of investing your money is the first consideration rather than just putting it in an investment vehicle. To cope with the difficult market situation, a careful assessment of individual needs and appetite is necessary. It is therefore important to understand the prospects for return on investment, as goals cannot be overestimated before making the investment decision.

2. Check the bank's credit rating

2. Check the bank’s credit rating

Bank credit ratings are measures of the likelihood of a bank defaulting or defaulting. Credit ratings are assigned to banks, other financial institutions from various agencies. Usually, these scores are expressed as letter ratings, with an AA or AAA rating being higher than a BB or BBB rating, and so on. A bank’s AAA or AA rating does not guarantee that it will not default; it just indicates that these agencies do not believe that a default is possible. Here’s one thing I would like to point out: make sure your bank is covered by the DICGC insurance plan. If the answer is yes, you shouldn’t worry about your bank’s credit report. Each depositor in a bank is covered up to a limit of Rs 5 lakh for the principal and interest amounts owed by him or her according to the guidelines of the DICGC. Deposits with all commercial and cooperative banks are currently guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India.

3. Interest on your deposit

3. Interest on your deposit

Regardless of the future development of interest rates or market behavior, returns on fixed deposits are guaranteed at the time of investment. You get back the amount of your deposit at the end of the maturity period, plus accrued interest. Banks offer different interest rates depending on the mandate and type of depositor. Interest rates differ from bank to bank. Seniors get interest rates 0.5% higher than those paid to the general public. Thus, comparing the highest FD interest rates of all banks and NBFCs is essential before investing in a FD. You will get guaranteed returns by investing in FDs with banks or NBFCs that have AAA ratings from ICRA and CRISIL.

4. Loan against your deposit

4. Loan against your deposit

Individuals apply for loans from various locations when they are in a financial emergency. Another option is the availability of loans against fixed deposits (DF) with banks. Rather than unnecessarily withdrawing their FD, depositors can easily apply for a loan against their FD through the bank. A loan against FD (Fixed Deposit) is a form of secured loan in which individuals guarantee their fixed deposit as collateral in exchange for a loan. The loan amount is determined by the FD deposit amount. This can be between 90% and 95% of the deposit amount. Since the maximum duration of the FD scheme is limited to the maximum duration of the loan, the maximum duration of the loan can be up to the maximum duration of the FD account. This type of loan is not available for investors who have a 5 year FD. Banks typically charge interest on these loans against Fds that are 0.5% to 2% higher than the relevant FD interest rate.

5. Ease of premature removal

5. Ease of premature removal

Fixed deposits that have an early withdrawal option cause the depositor to close the account before the due date. In times of financial stress, it’s a welcome respite. That being said, as a penalty to the bank, the depositor will be allowed to pay a certain amount. This is normally between 0.5 and 1% of the total. Some banks allow you to make a premature withdrawal without penalty. The bank or company, on the other hand, is not obligated to pay interest if the FD is closed prematurely before the 7 day period has elapsed from the date of deposit.

6. Choose a bank that has excellent customer service and a straightforward procedure for opening an FD account.

6. Choose a bank that has excellent customer service and a straightforward procedure for opening an FD account.

We live in the modern age of digital services, so there is no need to go to the bank to open a fixed deposit account. It is now as easy to open a fixed account online as it is to open a savings account in a bank. Banks that have an online option to open a fixed deposit account allow account holders to monitor their funds from anywhere and anytime. It is best to go with a bank that offers smooth and hassle-free internet and mobile banking services, as well as excellent customer service. This method requires you to choose the products and features you want, enter your personal information, and then make your initial contribution to complete the transaction. Currently, all major banks allow investors to open a fixed deposit account online. For example, if you want to open a fixed online deposit account in SBI, you can check here for the procedure.

7. Must be aware of cumulative and non-cumulative deposits

7. Must be aware of cumulative and non-cumulative deposits

A cumulative fixed deposit is a deposit on which interest is accrued until the end of the term. For a cumulative FD, you can reinvest the interest you earn on a regular basis, reaping the benefits of the compounding and receiving the accrued interest at maturity or end of the term. Interest earned on a non-cumulative fixed deposit is paid to the depositor on a regular basis. Interest is paid at periods ranging from monthly to quarterly and semi-annually. Since the strength of the composition is not filled, it pays less interest than the cumulative FD. In the cumulative alternative, the FD yields can be increased. Interest earned is reinvested regularly in this account. As a result, the interest on the FD at the end of the term is higher than on a typical non-cumulative fixed deposit, and the returns are significantly improved.

8. make online investing your habit

8. make online investing your habit

If you invest online, term deposits from some non-bank financial companies pay a slightly higher interest rate, starting at 0.10%. We can use Bajaj Finance fixed deposit as an example. This FD offers regular customers attractive rates of up to 6.50%, with an additional 0.10% rate advantage for online investments. Seniors, however, are not eligible for this additional benefit. However, they will get 0.25% more on their deposits. For seniors, Bajaj Finance FD rates go up to 6.75%. Bajaj Finance FD is also rated FAAA / Stable by CRISIL and MAAA / Stable by ICRA, which guarantees a higher level of security. However, you should always go for AAA rated corporate term deposits. Additionally, if you are only looking at the credit rating, you should also keep in mind that corporate FDs are not DICGC insured.


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About Joan Ferguson

Joan Ferguson

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