Fixed Deposit vs Recurring Deposit: Which can be a better option?
Fixed Deposits and Recurring Deposits are two popular term deposit options in India. One can invest a big sum of money in FDs for a set period of time to earn returns upon maturity. While in recurring deposits, small amounts can be deposited periodically for a long-term.
When it comes to making savings for the future, there are several investment options in the market. Fixed Deposit (FD) and Recurring Deposit (RD) are among the two popular investment products for people who are looking for guaranteed returns and low risk. They are considered to be very secure as they are not linked to the market and offer a fixed rate of return. While the two options seem similar, there are some differences between FDs and RDs.
FDs are one-time investment choices while RDs are monthly investment choices that allow participants to invest every month throughout the length of their scheme. Let's discuss in detail how these deposits differ and which one could be better for you.
Fixed Deposits: Benefits
1. One can invest a big sum of money in FDs for a set period of time to earn returns upon maturity.
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2. Investment in tax-saving FDs allows exemption of up ro Rs 1.5 lakh under Section 80C.
3. They are a safer investment option that promise a guaranteed return in the form of interest.
4. Investors can put aside their money for a longer tenure, based on their financial goals.
5. The interest rates on FDs are considerably higher in comparison to normal savings accounts.
6. One can also withdraw their funds in advance, in case of any emergencies or sudden need.
Recurring Deposits: Benefits
1. Participants can choose to make investments on a monthly basis, considering their financial status and earnings.
2. Investors can put aside their money for a minimum of six months to a maximum of 10 years, based on their objectives.
3. RDs made in Post Offices are exempted from taxation under Section 80C.
5. Investors can also take a loan against their RD investments.
6. The interest rates on RDs are considerably higher in comparison to normal savings accounts, but lesser than FDs.
FD vs RD: Which one is better?
Those who want to invest a lump sum amount of money for a long tenure in return for higher interest can go for FDs. Those who can only afford small investments every month should go for a recurring deposit.
Notably, both the FDs and RDs are low-risk investment options. While a fixed deposit can earn more than a recurring deposit, some still prefer an RD over a FD on the grounds of how much money they can invest in one go.