Having financial security in today’s world is something we all aspire towards. To attain financial security, it is quite important that we make the right investment choices. A fixed deposit(FD) is one viable financial tool that offers high returns. There are numerous benefits of a fixed deposit account.
Over the years, fixed deposits have become quite a popular form of investment. Not only does it protect your capital, but it also provides guaranteed returns from time to time. So, let’s learn more about the fixed deposit account and its benefits.
Why Choose a Fixed Deposit Account?
If you have a fixed deposit account, you can put a lump sum amount in it for a fixed period. The bank will guide you about how much- FD returns you can receive. At the end of the period aka the term, you will receive your capital along with the compound interest. Therefore, fixed deposits (FDs) are often called term deposits.
Benefits of Fixed Deposit Account
The benefits of fixed deposit are numerous.. Here are some the major ones: .
- Flexible Tenure
When you deposit money in a fixed deposit, you can choose the term. However, every bank has a set minimum tenure rule that you must adhere to. This term can range from 7 days to 10 years with the likes of ICICI bank. As the deposit holder, you can also decide whether to redeem the loan or extend it for a certain period.
- Get Easy Loans
Having a fixed deposit account can also increase your chances of getting approved for a quick loan, especially if you are applying with the same bank where you have your FD account. The loan amount you can borrow will depend on the balance of your fixed deposit account. For shorter loan tenures, you may be able to borrow up to 90% of the amount deposited in the account. This can be beneficial if you find yourself in an emergency and need funds quickly.
- Assured Return on Interest
One of the major benefits of having an FD account is that you will get assured FD returns. If you have a fixed deposit plan, the bank will guide you about the interest rate applicable to the deposit you make. The rate of interest remains the same throughout the deposit tenure. At the end of the tenure, the amount you receive will include the guaranteed interest. So, there won’t be any risk of financial uncertainty.
- Better Interest Rate Than a Savings Account
When you have a savings account, you earn a certain interest on the balance you maintain. However, the interest will vary depending on your savings. On the other hand, the FD interest rates offered by the banks are quite higher. Before making a deposit in your account, ask your representative about the interest rate. Some banks offer an interest rate of more than 7% on savings accounts.
- Tax Benefits
You can claim up to Rs 1,50,000 as deductions under Section 80 C of the Income Tax Act, 1961. The investment you make qualifies as tax-deductible within this Section, especially when you have a tax-saving fixed deposit account. Banks and post offices usually offer this type of tax benefit on five-year FDs. As a result, the tax liability will reduce significantly.
- Encourages Savings
Having a fixed deposit account encourages holders to save. If you’re saving money in cash, you will not get any interest or return. On the other hand, saving your money through a fixed deposit will encourage you to save more and grow your money. As a result, you will be able to achieve financial stability easily.
- Easy Liquidation
When you have an FD account, you can easily liquidate it. Not only can you open an FD online, but you can also liquidate it conveniently through net banking and mobile apps just as easily. This makes it quite convenient, as you don’t have to visit a bank branch. for. If you visit a bank you will need to fill out the liquidation form. Once the manager approves, the account will be liquidated.
There is no upper limit that you need to follow while opening a fixed deposit account. You can open an FD account for as little as Rs 5,000. Since FD accounts provide the flexibility of customisation, you can choose the upper limit and tenure as per your preference. You can either go for a short-term, mid-term, or long-term. Considering all these flexibilities, anyone can open an FD account easily.
If you want to avail of a loan without having to provide any collateral, you can always showcase your FD account. When you provide proof of your FD account, you can get a loan amount of up to 90%. However, the loan you avail will significantly depend on the terms and conditions of the bank.
- Capital Security
When you have an FD account, you need not worry about capital erosion. The financial institution will definitely pay you the money you owe at the end of the tenure. However, you will get the total amount at the maturity of your account. Therefore, you do not lose any money on your investment.
It is always a wise decision to check out different options before opening an FD account. The more you research, the better options you’ll find. Having an FD account protects you against financial stress, especially in the long run. If you find difficulty in deciding the tenure, you can consult your bank representative, as they will help you understand all the details. It is necessary that you choose the right tenure. If you withdraw the amount before the tenure ends, the returns will be lower. So, consult your representative and decide accordingly for your FD bank account.