What Is Fixed Deposit and should you have one?

Fixed Deposits are still relevant. Here are their best features

Investment in any financial instrument is invaluable. The amount that you invest doesn’t matter if you’re investing consistently. There are many great investment vehicles that you can use to grow your money. One of them is fixed deposits (FDs). Irrespective of whether you are new to investing or are looking for investment options that carry less risk, having an FD account is essential. With an FD with Metra Trust, you can earn up to 7.75% p.a. on idle funds, while senior citizens can earn up to 8.25% p.a. interest.

Here is what you need to know about fixed deposits.

What is a Fixed Deposit?

A fixed deposit is one of the most easy-to-use, low-risk, and accessible investment options. An individual who is looking to invest their money can start a fixed deposit account at any bank or NBFC of their choice.

The customer can choose the amount they want to park in the fixed deposit account and the duration for which they want to stay invested in fixed deposits.

The minimum deposit requirements may vary from bank to bank, and so does the minimum term duration and interest rates. While they are low-risk and hassle-free, the FD interest rates can be lower than other lucrative investment options. Look for banks that offer a favourable interest rate.

Features of a Fixed Deposit account

Here are some features of a fixed deposit account you should know.

Tenure

You can have a short-term fixed deposit account or a longer investment for 3 to 10 years. Various options, starting from 7 days to over 10 years, are available. You can decide the tenure of your FD based on how you plan to use the money and when.

Amount of deposit

The minimum deposit amount varies across banks or other organisations that offer FD investment options. However, most of them allow you to start with ₹1000 to ₹5000. 

Interest rates

FD interest rates are usually lower than other popular investment alternatives. Nevertheless, it is also important to note that FDs offer a high degree of security and carry less risk. Depending on the bank, amount deposited and the tenure, the FD account-holders, in general, receive interest rates between 3% to 7.75% p.a., while senior citizens may receive higher rates subject to individual bank's policies. For a correct estimation of potential earnings, you might find the FD calculator useful.

Tax benefits

If you invest in a long-term fixed deposit, you can claim tax benefits by citing it as an investment. The same may not apply to short term fixed deposits.

Guaranteed returns

FDs are low risk and more secure. Upon maturity, you will receive the principal amount along with interest.

Premature withdrawal

While it is not advisable, one can make a premature withdrawal of their FDs. They may need the amount for an unforeseen emergency or may want to reinvest elsewhere. Premature withdrawal may entail a penalty fee.

Useful in financial emergencies

If you need money but do not want to break your FD apart, you can consider getting a loan against your fixed deposit.

How to open a Fixed Deposit account?

As mentioned before, interest rates, minimum amount, and duration vary from bank to bank. It is important to check the terms offered by various banks to pick the one that suits you. Also, you might need to open a savings account with the bank before to invest in a fixed deposit account with them.

Once you have chosen the bank, you can complete the process online or offline. Keep documents such as your proofs of identity and address and your savings account passbook handy. If you are opening the FD on behalf of a minor, you may need the set of documents for both individuals.

Fill in the fixed deposit application form and submit it online or to the branch in person.

Upon maturity, you may want to withdraw the entire amount, including the interest, or you may choose to reinvest the principal amount into a new FD. For the best interest rates and benefits, head on to Metra Trust’s website and see what they have to offer for you.

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Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.