Fixed deposits are considered one of the safest and most stable investment options. People with a low-risk appetite who are looking for guaranteed returns prefer fixed deposits over other investment tools. Unlike a stock investment, getting into fixed deposit scheme assets is pretty simple. Most banks offer a fixed deposit account to their customers, so they don’t have to open a new account at a different financial institution to invest their savings. Read on to learn more about fixed deposits and interest rates offered to fixed deposit holders in India.
What is a fixed deposit?
A Fixed Deposit (FD) can be explained as a type of investment instrument offered by financial institutions to help people invest/save money. Most people put a significant sum of money in their FD account. This amount is invested for a fixed period at a prespecified interest rate. At the end of this fixed period, the account holder gets a lump sum return, as per the terms of the agreement. The interest rates offered on a fixed deposit scheme differ based on the type of FD and the financial institution in question.
Tips to get higher FD interest rate and maximise return
Getting a higher interest rate on your FD account is the best way to maximise returns on fixed deposit investment. However, finding the highest interest rate is not an easy task. Since FD investments are considered safest, the underlying investment mechanism doesn’t allow investing the FD funds in a high-risk asset. Therefore, the benefits passed on to FD account holders are also lower. However, some best practices regarding interest rates can be followed to get the highest returns.
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Compare FD account interest rates from multiple providers
The first step in the process of finding the best interest rate starts with basic research that includes finding out the interest rate offered by different financial institutions. Then, comparing different deals can easily help in identifying the best one. Thanks to the digital era, you don’t have to visit various bank branches to do this physically. Instead, all you need to do is visit the website of the prospect banks and navigate to their FD section.
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Invest for a longer period
Investing in a fixed deposit scheme for a longer period can increase the interest rate for that investment. Banks offered varied interest rates for different tenures. Extending the investment tenure even by a day can lead to an increase in the interest rate. Finding the highest acceptable term for which you can invest the money is the best way to increase the fixed deposit interest rate.
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Cumulative FDs offer a higher return
FDs can be broadly classified into two categories: cumulative and non-cumulative. The non-cumulative FDs are ideal for those looking for a consistent income source. These schemes pay interest to the account holders regularly (monthly, quarterly or annual). Pensioners and old-age people usually prefer this type of FD. On the other hand, the cumulative FDs offer a lump sum return at the end of the investment period. The interest rate offered to cumulative account holders is higher as money is not taken out at regular intervals. The compounding effect really takes in to provide a surplus return to investors.
Final words
Getting the highest interest rates on an FD account requires a lot of research and planning. You must compare different FD account plans from multiple financial institutions to choose the right one. Also, investing for extended periods will surely give you a higher interest rate. Finally, you must select a reliable financial institution like PNB housing finance limited to invest in a fixed deposit scheme.
