A fixed deposit (FD) account is offered by banks as a form of investment either for a short period of time or a long span at attractive interest rates. In case of a savings account, cash can be withdrawn at any point of time, but an FD works differently. In case of an FD the amount deposited is locked in for a certain span of time at a high rate of interest.
A fixed deposit is a great way of saving money, especially for aged individuals who do not want to take much risk with their investments. Agreed, it gives back lower returns as compared to mutual funds, but an individual’s money stays secure in an FD and returns are definitely guaranteed.
The best way to calculate investment and consequent returns when planning to open and FD is through a FD calculator. The FD calculator will give one a clear idea about his investment, the amount of interest earned and the term of the FD.
There are also a few factors that should be kept in mind when investing in a fixed deposit account. They are-
Opt for a deposit insurance when opening a FD
Banks offer a deposit insurance up to 1lakh rupees only. Thus, if one wants to invest more than a lakh in an FD, it is best that you open more than one FD account at different banks or under different family member names, to ensure safety of investment.
Ensure a good interest rate deal
Do not end up locking in a large sum of money, for a long period of time at a very low interest rate. In order to ensure a good deal, split the investment between different FDs at different interest rates and terms. Thus, if one FD account has a tenure of one year, the other can hold a tenure of about 2-3 years.
Opt for a FD at public sector bank
This is primarily because a public sector bank is a safer option than a private sector bank. Moreover, the returns are also higher when investing in a FD at a public sector bank as compared to the private sector. Calculate the returns with an FD calculator to compare.
Consider co-operative societies and non-financial institutions
FDs are also offered by co-operative societies as well as non-financial institutions. Because of the high risk factor in investing in an FD with such institutions, the rate of interest offered to the customer is also quite high as compared to banks. Thus, while high returns are ensured, make sure to choose an institution that is reputed and reliable in order to ensure some safety of investment.