Why Fixed Deposit is Preferred Choice of Every Individual?
Fixed Deposit is worshipped as the best investment avenue for a common man. Fixed Deposit stands on top of the list for parking surplus money for long as well for short term. The money can be parked in bank for a period ranging from 7 days to 10 years at various interest rates.
Fixed Deposit up to Rs.1 lakh is insured by the Reserve Bank of India. This means in case of bankruptcy of bank, RBI will make good your losses up to Rs.1 lakh.
Remember the amount of Rs.1 lakh includes both Principal as well as Interest. For instance if you have Fixed Deposit of Rs.1 lakh at 9% p.a. and bank become bankrupt, you will only get principal of Rs.1 lakh by RBI. On the Contrary, if you have Fixed Deposit of Rs.50,000 at 9% p.a. for two year and bank becomes bankrupt after one year, you will get Rs.54,500 i.e. principal of Rs.50,000 plus interest of Rs.4,500 for one year.
We all know that Mutual Funds gives superior returns over Bank Fixed Deposit but what makes bank fixed deposit a preferred choice is the simplicity of opening and operating it. For investing in mutual fund, you have to first do homework for selecting best scheme and then open DEMAT account for investing. But in fixed deposit, you have to simple write a cheque of desired amount and get your Fixed Deposit Certificate in your hand.
Gathered money for making down payment of your new car but its few days away, don?t keep money idle in your vault, park money in FD and take it out when required. The tenure of fixed deposit start with 7 days and go up to 10 years.
Another reason for investing in Fixed Deposit is the liquidity. You can encash your Fixed Deposit any time by paying penalty up to 1% on the amount withdrawn.
Remember premature withdrawal of Bank Fixed Deposit may turn your return into negligible figures. For example, you have deposited Rs.1 lakh at 9% for three years but broke it at end of first year. Your return would reduce by 1% to 8%. At tax rate of 10%, post tax return would be just 7.1% i.e. just 0.10% above inflation rate of 7%.
The condition becomes worse when bank charges penalty in addition of reducing applicable interest rates. For instance, continuing above example, the applicable rate for one year fixed deposit was 7% at time of opening your FD, so you will earn only 7% interest on the deposit which gets reduced by penalty of 1% plus tax of 10%, results into return of 5.4% only.
5. Risk free Return
Bank Fixed Deposit gives you guaranteed return. Further, there are no risks associated with fixed deposits. You will get exact amount (principal plus interest) at the maturity.
Usually mutual fund investment comes with certain charges like exit load, transaction charges, expense charges etc. But bank fixed deposit investment is clear as glass. No hidden or extra charges, you will get cent percent of what you are told at the time of opening of fixed deposit.
Latest Bank Fixed Deposit Rates Comparison
We have acquainted with the benefits of investing in Fixed Deposit. It?s time to see the rate of interest offered by various banks operating in public sector, private sector, foreign banks and cooperative banks.
- Fixed Deposit Interest Rates for Senior Citizens is 0.50% more than above stated rates.
- Do reconfirm the rates from the respective banks before making any financial commitments.
- Above rates are applicable for Fixed Deposits up to Rs.1 crore.
Fixed Deposit Calculator
Calculate return from you fixed deposit according to the rates and tenure given above.