Difference Between Fixed Deposits And Recurring Deposits
Updated On Dec 30, 2022
Table of Contents
In today’s unpredictable times, investment is the key to securing your future. No matter how much you are earning is, it is extremely important that you put a part of your hard-earned money into investments. These days almost all banks offer the provision of opening savings accounts such as fixed deposits and recurring deposits which are great investment tools as well. Both of these accounts are popular amongst investors who are looking for options that are less affected by market volatility or those who have a low-risk appetite. However, there are certain differences between the two that you must know. Read on to know all about the differences between a fixed deposit and a recurring deposit.
Recurring Deposit
Popularly known as RD, Recurring Deposit is offered by different Indian banks and other financial institutions such as NBFCs. Any individual can contribute a certain amount of their income towards Recurring deposits and get guaranteed returns after a fixed period of time. The tenure of recurring deposit can be chosen as per the individual, however, it must range between 1-10 years. Moreover, the rate of interest varies depending on the financial institution with which you are opening your recurring deposit account.
Some of the salient features of Recurring Deposits are
- With Recurring deposits, you can regularly invest your money. Doing so helps in meeting your future goals as well as securing the future.
- You can invest in recurring deposits with a minimum amount of Rs. 500 and much higher depending on your income.
- You have the flexibility to choose the tenure of a Recurring Deposit.
- You can use RD’s for loan collaterals for a certain period of time.
Fixed Deposit
Fixed Deposit, on the other hand, is another type of investment option that yields high returns after a fixed period of time. A Fixed Deposit account can be opened at any bank, post office, NBFC, and others. However, the rate of interest varies from one financial institution to another. Based on the tenure and amount deposited, you can get stable returns from fixed deposits.
Here are some of the features of Fixed Deposits:
- It is very easy to open a fixed deposit account at your nearest bank.
- The rate of interest earned from fixed deposits is higher than compared to many other saving accounts.
- You can also renew your fixed deposit at per convenience.
- You cannot withdraw your maturity amount earned from the fixed deposit before the end of the fixed deposit tenure.
RD Vs FD
Now that you have understood exactly what RD and FD are, let us highlight the key differences between RD and FD in the section below.
|
Point of difference |
Recurring Deposit |
Fixed Deposit |
|
Investment Frequency |
In Recurring Deposit, you can invest any amount of money at regular intervals |
In Fixed Deposit, you need to invest a lump-sum amount and can make no contribution after that |
|
Tenure of deposit |
In recurring deposit, you can choose a time frame between 6 months to 10 years |
In fixed deposit, the tenure of deposit can range between 7days - 10 years |
|
Interest Amount |
The interest amount earned out of recurring deposit is not very high |
The interest amount earned out of fixed deposit is higher than the recurring deposit |
|
Payment Frequency |
The maturity amount in the recurring deposit can be withdrawn on a quarterly or regular intervals |
In a fixed deposit, the maturity amount is only provided after the end of fixed deposit tenure |
|
Key benefit |
Recurring deposit inculcates the habit of savings so that you can invest your money in recurring deposits every month |
Fixed deposit on the other hand provides the benefit of getting a lump-sum amount |
|
Payment clause |
In recurring deposit, if you miss to make the payment for more than 6 months, then there are chances that your RD account can be closed by the respective financial institution |
As the entire payment is made in go, so there is no payment clause attached with Fixed Deposits |
RD or FD?
Now the question is whether to choose RD or FD. The answer totally depends on you as both of these involve low-risk factors. So, if you have the ability to pay a lump-sum amount for opening an FD account, then choose FD. Otherwise, if you wish to pay at regular intervals, then opt for opening RD.
Take Away
Thus, visit your nearest bank or any other financial institution to get either a Recurring Deposit or Fixed Deposit account opened at the earliest. This will help you in creating a corpus for your future goals as well as be prepared against unexpected situations.
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