Investing in a recurring deposit is the best way to ensure that you grow your savings as you earn. An RD account can be opened with just Rs. 500.
Most banks compound the interest rate on RDs after every three months. Recurring deposit interest rates vary from bank to bank. Also, the interest rates seem to increase with an increase in tenor, and senior citizens always get a 0.5% extra interest rate on all the types of RD schemes.
Investing in recurring deposits is a good option for the salaried people who earn every month and can allocate a fixed amount for monthly investment. However, if you plan to earn higher returns, then you can think of investing in fixed deposits schemes instead. Let us compare their features:
Flexibility in investment terms
In a recurring deposit, you need to invest a fixed amount every month. Therefore, you can plan to invest a fixed portion each month from your salary, and the tenor can be set between 1 to 10 years as per your convenience.
In a fixed deposit, you just have to deposit a fixed amount one time, and this amount will keep attracting interest until the maturity date. An Online FD Calculator can help you to predict the exact returns and interest that you will earn at maturity according to the principal amount and tenor you select.
Financiers such as Bajaj Finance also allow you to open multiple FDs having different amount and tenor with a single cheque. With this multi-deposit facility, you can ladder your investments and earn sufficiently even during fluctuating interest rates.
Interest earnings
The interest rates offered on RDs and FDs are almost the same with a few exceptions. However, with FDs, you can earn more as the interest is calculated on the entire invested capital.
On the other hand, in the case of a recurring deposit, you will earn interest for the entire investment term only for the first installment. The subsequent installments will earn less interest and the interest gets reduced with every passing month.
Also, if you choose cumulative FD, the interest is compounded over the tenor, and you earn a much better interest at maturity. NBFCs like Bajaj Finance are offering much higher interest rate up to 8.60% for regular citizens and 8.95% for senior citizens. Moreover, an additional 0.10 % interest rate is offered on renewing the FD.
Liquidity
Bajaj Finance FD provides an option to avail periodic interest payouts- quarterly, monthly, annually, or bi-annually to help you to meet your regular expenses with ease. You can also withdraw your FD prematurely by paying a nominal penalty fee.
Collateral-free loans
Both RDs and FDs offer collateral-free loans. A much higher amount can be availed as a loan on FD as the deposited amount is usually on the higher side.
Also, Bajaj Finance FD is rated high for its safety and stability by ICRA and CRISIL, which makes it a Smart investment avenue to multiply your money. Bajaj Finance FD also provides you the option of opening FD account with a debit card. You can manage your account online with Experia- your online fixed deposit account.
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