Fixed Deposit vs Recurring Deposit

Fixed deposits and recurring deposits are two ways that banks help people save money. The sum put in a fixed deposit is locked away and reserved for a certain duration of time. Recurring deposits, on the other hand, provide for the monthly deposit of a certain sum of money for a predetermined length of time. Through Internet banking, fixed deposits and recurring deposits may be established and accessed online.

Recurring Deposit Account

Recurring deposit is a financial tool provided by banks in which individuals with a good and stable income deposit a fixed amount into their recurring deposit account on a monthly basis. By depositing the money, customers become eligible and earn interest on the deposited amount. It is a kind of term deposit.

• This account needs its customers to deposit a specific amount of money for a predetermined period on a monthly basis.
• By opening these accounts, an individual can promote saving habits.
• These accounts can be opened and accessed for short, medium, or long periods, and the interest rates offered vary from bank to bank and on the time period chosen.
• Different types of recurring deposits are offered by banks to children, individuals, non-resident Indians, and senior citizens with different interest rates.
• The application process for recurring accounts varies from bank to bank.
• You can close your recurring deposit account. However, a penalty might be levied.

Recurring Deposit Account – Features

Some of the features of recurring deposit accounts that make it a suitable choice for your future are:

• You can deposit a minimum monthly amount of around ₹500 for opening a recurring deposit account. However, it might vary between banks.
• You can open a recurring deposit account with a minimum tenure of 6 months and a maximum of 10 years.
• An individual account holder can open multiple recurring deposit accounts.
• Under the guidance and supervision of their guardians or parents, minors can also open a recurring deposit account.
• Generally, you cannot withdraw funds from a recurring deposit account.
• An automatic deduction feature is offered by several banks. This feature allows a deduction of the specific amount from the account holder's account each month instead of a manual deposit.
• Seniors who have recurring deposit accounts with certain institutions may be eligible for greater interest rates.
• You could be required to pay a penalty if you want to take money out of your recurring deposit account before the end of the term.
• Those with recurring deposit accounts are required to deposit a certain amount each month rather than a flat payment.

Fixed Deposit Account

Fixed deposits are financial tools provided by banks and non-banking financial institutions to offer a saving instrument for a safe future. Fixed deposit account holders can deposit a lump sum amount for a specific time period and receive interest payments. Either quarterly or monthly or on the maturity of the deposit. Some of the benefits offered by fixed deposit accounts are:

• Fixed deposit account holders earn interest on the deposits made for a fixed period.
• The interest rate on any FD is the same and does not change, irrespective of any interest rate or market fluctuations.
• Customers can receive interest payments upon the maturity of the FD or regularly.
• The fixed deposit account holder cannot withdraw their money before the maturity of the FD. If anyone is willing to do so, they have to pay a penalty.

Fixed Deposit Account – Features

Some of the major features of fixed deposit accounts you must acknowledge before investing are:

• A fixed deposit means a single-time payment of the lump sum amount. However, you can even deposit additional funds as separate FD.
• Guaranteed returns are offered by fixed deposits.
• It depends on the investor on how they want to receive their interest payments. They can either choose interest payments monthly, quarterly, annually, or upon maturity of the FD.
• As compared to the other investment options, fixed deposits offer higher interest rates.
• FD returns are not affected or changed due to any market fluctuations.
• Once the fixed deposit matures, the investor can reinvest in FD.
• There is no restriction on the maximum limit that the investor can deposit in an FD.

Difference Between FD and RD

The differences between FD and RD are numerous in terms of their interest rates, limitations, benefits, features, deposit requirements, and tenure. Hence, refer to the table below to get an overview.

Every investor must consider the difference before investing in FD or RD. Moreover, after selecting one of these investment schemes, consider the different offers, services, and conditions by different banks. Lastly, whichever scheme and bank aligns the best with your preferences, go for that one.

Conclusion

There is a major difference between FD and RD, including the amount to be deposited, the deposit duration, and the frequency of deposit. As fixed deposits offer individuals the ability to lock in a certain amount of money for a fixed period, recurring deposits offer individuals the ability to deposit monthly amounts over a certain period. Both accounts can be useful to promote and encourage saving habits. However, the best choice depends on your financial goals, needs, and the interest rates and services offered by various banks. Carefully compare all the factors before you go for the account type you want to open.