Why should you consider a Recurring Deposit for future benefits?

For many people, a recurring deposit (RD) has not only helped create a disciplined saving habit but has also been an ideal way to build a corpus for the future. But before you decide to open an RD (if you don't have one already), it is essential to understand some basics regarding this type of account.

What is a Recurring Deposit?

As the word 'recurring' suggests, it is an instrument for making regular monthly investments of a fixed amount for a selected tenure. The bank adds interest on the accumulated funds, which acts as an income for you. RDs are considered one of the safest investments available. The target of a recurring deposit is to mobilise your savings to earn returns on your investment, enabling you to achieve the financial goals you have set. The interest rate on RDs is usually calculated on a quarterly compounded basis or as specified by the bank.

How does an RD Account work?

Unlike a regular fixed deposit, wherein you invest a lumpsum amount at one go for a predetermined tenure, a recurring deposit account lets you invest a specified amount each month until the end of the tenure. The monthly amount generally remains unaltered during the tenure. One of the benefits of such an investment is that you can invest a sum that doesn't hamper your monthly expenditure; instead, it can help increase your future funds.

Benefits of a Recurring Deposit

1. Attractive interest rate

The most beneficial factor of a recurring deposit is the attractive interest rate, making it more profitable than a regular savings account. For instance, if you open an RD account with Metra Trust, you get attractive interest rates. The interest rates are calculated per annum, compounded quarterly.

2. Penalty not included

There was a time when you needed to pay penalties if you missed a monthly payment due. However, with institutions like Metra Trust, saving with an RD account has become more investor-friendly as you do not incur a penalty for missing an installment. At Metra Trust there are no premature withdrawal penalty charges for  Recurring Deposits. However, if you withdraw your investment prematurely, the latest interest will not be added to it.

3. Start with a feasible amount

Even those with a slightly lower income can build savings through an RD account as the minimum amount starts at around Rs 500 and varies according to different banks or institutions. Metra Trust makes this investment a far more viable option by setting the minimum amount at Rs 100 (maximum investment per month is Rs. 75,000). So you can get started with the amount you are comfortable with and you don't have to compromise on your daily expenses.

4. Choose short tenures

Like the minimum sum, you can choose a short tenure depending on your financial capacity or needs. With Metra Trust, you can choose to open a recurring deposit account for a period as short as six months, making it an ideal option for short-term investments.

5. Easy documentation

 If you already have a savings account, you can open an RD account with the same bank and link it to your savings account with no additional documentation needed. This makes starting an RD a hassle-free process.

6. Recommended for short-term goals

If you are someone who has or sets lots of short-term goals, such as annual holidays or upgrading your phone/ gadgets every few years, an RD can be an excellent option to save for these goals.

7. Save through instalments

Most people open FDs when they receive large lumpsums, such as bonuses. However, this is not something that everyone enjoys. If your income and budget leave you with a smaller amount at the end of the month, you can put these extra funds to work by starting an RD account. This way, you can put away small amounts to eventually accumulate a large sum, and your money, which would otherwise lie idle in your bank account, can earn a higher interest rate.

Recurring deposits give you a risk-free fixed income, and with Metra Trust offering attractive rates, it makes complete sense to open an RD account today to establish a more secure financial future.