Features Of Fixed Deposit
Published On Aug 26, 2021
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A fixed deposit is an investment scheme that has a pre-decided tenure and rate of interest. It is regarded as one of the safest investment options in the market as it is not affected by market fluctuations. It is a simple and straightforward investment option that works great for risk-averse investors.
Key Features And Benefits Of A Fixed Deposit Account
Shared below are some of its features that you may want to know:
Flexibility To Choose A Suitable Duration
The tenure of your fixed deposit can be as low as 7 days and go up to a maximum of 10 years. This provides you with the flexibility to choose a suitable duration, as per your investment goals.
Versatile Interest Pay-outs
You can collect the interest gained on your principal amount in two ways - cumulative and non-cumulative. If you choose the cumulative option, the interest is compounded and deposited in your account at the end of your fixed deposit tenure. As for non-cumulative interest, you can choose to collect it at scheduled intervals, monthly, quarterly or yearly.
Doubles As A Liquid Asset
Assets that can easily be converted into cash are liquid. Fixed deposits at any bank are liquid assets since they offer customers the option for a sweep-in facility. The facility allows you to easily tap into your fixed deposit funds, without having to pay a penalty which is an industry norm (fixed deposits under the tenure of fewer than 182 days).
Higher Rate Of Interest
Investing your money in a fixed deposit with your concerned bank will yield high interest. A higher rate of interest on your investment can help you stay ahead of the inflation curve. However, confirm the interest rates with the bank as interest rates are subject to change.
Auto-renewal Of Policy
In case you miss out on mentioning if the fixed deposit should be renewed or withdrawn at the end of its tenure, your bank auto-renews your fixed deposit. The entire sum at the end of the tenure is reinvested for the same period.
Your concerned bank should provide you with an overdraft facility against your fixed deposit. In your hour of need, you can borrow up to 90% of the total fixed deposit amount. This does not impact your savings in any way.
Tax Saver Deposit
As a special benefit, almost every bank has a Tax Saver Deposit plan that allows you to enjoy the same rate of interest as a regular fixed deposit while helping you reduce tax liability. The plan has a lock-in period of five years.
Fixed deposits have been a preferred investment option for the majority of the population. This is because it offers investors guaranteed returns and is not volatile, unlike other similar products. Its simple structure and multiple benefits have worked in its favour.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.