Flexi Fixed Deposit
A flexi fixed deposit is a fixed deposit type that combines the benefit of a savings account and a fixed deposit. This FD type allows the facility of partial withdrawal while giving higher returns.
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What is a Flexi Fixed Deposit?
A flexi-fixed deposit is a special deposit type that is offered by Indian banks. It is the combination of a demand deposit and a fixed deposit. In a flexi fixed deposit, the depositor has to manually add money to their deposit account. Additionally, the depositor enjoys the dual facility. The depositor can benefit from the liquidity of savings & current accounts while making the most of high FD returns.
All flexi-fixed deposits come with a prime feature that combines the power of savings & current accounts and fixed deposits. This feature is referred to as the auto-sweep or sweep-in feature. According to the feature, the excess balance of a specific amount gets automatically transferred to a fixed deposit account. The amount is transferred for a default term of one year.
Features of Flexi Fixed Deposit
If you wish to invest in flexi fixed deposit, it is highly recommended to go through the significant features so as to gain an idea of the investment you want to make. The list of prime features of flexi fixed deposit includes:
- The tenures for flexi fixed deposits are flexible. The depositor can select the tenure as per their requirement.
- Flexi fixed deposits offer higher interest as compared to savings accounts.
- Depositors can decide the investment amount as per their needs.
- Flexi fixed deposits come with the premature withdrawal facility.
- Depositors can avail bank loan facility with the bank they have flexi fixed deposit with.
- The flexi fixed deposit account is easy to open.
- Flexi fixed deposits come with the facility of auto-renewal that comes into effect at the end of policy tenure.
Benefits of Investing in Flexi Fixed Deposits
If you are planning to invest in flexi fixed deposits, you are going in the right direction. Flexi fixed deposits are one of the best fixed deposit choices to make if you wish to gain various benefits.
Mentioned below are some of the prime benefits of investing in flexi fixed deposits:
- Premature Withdrawal - Flexi fixed deposits allow liquidity, thereby helping in cases of emergency situations. You can make a premature withdrawal of your flexi fixed deposit amount and use it at the time of need.
- Higher Rate of Interest - Flexi fixed deposits offer higher interest rates as compared to a savings account.
- Freedom to Choose Investment Amount - Flexi fixed deposit requires you to invest in a lump sum manner. It is up to you to choose a specific amount of your choice as per your needs. It is advised to check the investment amount deposit criteria with different banks before investing.
- Freedom to Choose Investment Tenure - You will be free to choose the investment duration under your flexi fixed deposit. Based on your financial goals, you can stay as long or as short as you invest.
- Loan Against Deposit - Flexi fixed deposit allows you to avail loan against fixed deposit. Since the benefit may vary with the bank, it is advised to check in the first place.
- Automatic Renewal - Most banks offer automatic renewal of flexi fixed deposits, thereby eliminating the effort of remembering the renewal dates and getting the FD renewed.
Eligibility for Flexi Fixed Deposits
Flexi fixed deposits can be invested in by the resident individuals of the country. The depositor must have a savings account in the bank and hold a valid PAN Card.
Difference Between Fixed Flexi Deposit & Regular Fixed Deposit
If you are new to the world of fixed deposit, you may get confused between the flexi fixed deposit and regular fixed deposit types. Know that before you go ahead with your choice, it would be important to understand the prime difference between the two.
The major difference between the flexi fixed deposit and regular fixed deposit is that the flexi fixed deposit offers certain benefits that the regular fixed deposit does not.
Flexi fixed deposits are chosen over regular fixed deposits over liquidity and the flexibility that comes with them. In the case of a traditional fixed deposit, the depositor deposits a fixed amount for a fixed tenure at a preset interest rate. But, withdrawal of this amount before maturity is not allowed. This is one of the key limitations of regular fixed deposits as in case of financial emergency situations the regular fixed deposit does not prove to be of much use. On the contrary, in the case of flexi fixed deposit, depositors can withdraw a certain sum of money from current account or savings, which are ultimately merged with the flexi fixed deposit account. What’s more beneficial is that in the case of flexi fixed deposit, the installment amount, tenure, and number of times are not fixed and can vary during the investment period on the basis of bank guidelines.
Documents Required for Flexi Fixed Deposits
Do you wish to open a flexi fixed deposit account? If so, learn that you will be required to submit a series of documents including:
- Duly filled application form.
- Identity proof (PAN card, Passport, Voter ID card, Driving license, Senior citizen ID card, Aadhaar Card)
- Residence Proof (Passport, Electricity bill, Telephone bill, etc.)
Moreover, there are also a few things you must keep in mind before submitting your documents for flexi fixed deposit account:
- To give original documents to ensure smooth verification.
- To submit photocopies of each document.
- To provide your permanent address and telephone number.
- To avoid overwriting and if overwritten, you must always countersign.
Things to Remember About Flexi FDs
A few major things you must always remember about flexi fixed deposits are:
- The process of opening a flexi fixed deposit is quite easy. Most banks in India offering flexi fixed deposit service have a transparent process. You simply have to fill the application form, provide details regarding tenure, amount, and more.
- You will be required to deposit a lump sum amount in one go. However, you will get the freedom to choose the amount you want to deposit. Since different banks have different deposit criteria, it is advised to check with the bank before investing.
- Many banks do not allow loans against FD in case of flexi fixed deposit, therefore, it is advisable to check the loan facility at your bank beforehand.
Why Should You Choose Life Insurance Over Flexi Fixed Deposit?
There is no doubt about the fact that flexi fixed deposit is a beneficial investment to make. However, you are advised to consider opting for a life insurance policy. The reason being the various benefits that life insurance has over flexi fixed deposit.
When an insurance company and an individual sign a contract where the insurer promises to pay a particular sum in case of the death of the life assured or on plan maturity, it is called life insurance. It must be noted that in order to avail the various benefits of life insurance, the policyholder has to pay the policy premium.
Take a look at the below mentioned key reasons that make life insurance a worthwhile investment over flexi fixed deposits:
- With life insurance, you can choose to insure yourself and invest all at once.
- With life insurance, you don’t have to worry about getting insured again and again. You can easily get insured for your lifetime and not just a few years with your life insurance plan.
- Life insurance safeguards you against different risks. It takes care of your family members or dependents financially in case of your unfortunate demise.
- Under life insurance covers, you get covered for a longer time than you pay premium for.
- Life insurance gives you various options like retirement plan, protection plan, saving plan, and more to choose from based on your specific requirements.
- Life insurance comes with tax benefits in adherence to Section 80C and Section 80D of the Income Tax Act, 1961.
Disclaimer: The above information in relation to Fixed Deposits is for education purpose only and not to be construed as investment advice. Consultation with an investment advisor prior to any investment decision is highly recommended.
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FAQ About Flexi Fixed Deposit
Who should choose flexi fixed deposit?
Any individual who wishes to have a fixed deposit with liquidity to safeguard themselves financially in case of emergency situations must choose flexi fixed deposits.
How can I invest in a flexi fixed deposit?
To invest in a flexi fixed deposit, all you need to do is firstly select the bank where you want to open the flexi fixed deposit account. Then, you will have to provide your details like investment amount, tenure, and more to get your flexi fixed deposit account opened without any hassle.
Can I withdraw my money in case of emergency from my flexi fixed deposit account?
Yes, flexi fixed deposits come with the feature of liquidity such as partial withdrawal, so you can easily withdraw the money in case of an unexpected emergency situation.
Is TDS applicable in case of flexi fixed deposit?
Yes! TDS will be applicable in the case of flexi fixed deposit.
Can I get loan against my flexi FD?
Yes, you can! However, note that some of the banks do not allow loan facility against flexi FD. it is advised to check the feature beforehand with the bank of your choice.
Is life insurance really worth buying?
Life insurance is not compulsory in India, however, it is highly advised. With good life insurance, you can easily secure the financial future of your dear ones. You can easily make sure that your dependents do not suffer from financial issues even if you are not alive. A life insurance policy will make sure your family members or dependents live a peaceful life, free from financial concerns even after you are not there to take care of them.
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