What you Need to know about Fixed Deposit Plans Today

Fixed deposit is an investment avenue which allows everyone to invest money for a fixed span of time to earn a fixed rate of interest for that amount. It’s one of the most popular forms of investments in India.

Here, you can deposit your money for as low as 7 days and up to 10 years. It’s termed as fixed deposit since the rate of interest and the duration are fixed. This type of deposit is called Term Deposit in countries like New Zealand, Canada and Australia, Certificates of Deposit in the United States and Bond in the UK.

Understanding how the FD Interest Rate Works

When you open a fixed deposit with a bank or a financial institution, then you are lending money to the bank. For that, it offers an interest. Every bank or financial institution offering fixed deposit determines their own FD interest rate. These rates change from time to time depending on the duration, amount deposited and the economic condition of the country. Almost all banks offer a higher FD interest rate to citizens aged over 60 years.

The applicable rate of interest will be given on the date in which the deposit is made. It will be fixed for the specified duration. That means even if the FD interest rate goes up or down during the term of the fixed deposit, you’re entitled to get the rate that was promised to you at the time of the deposit. But it’s important to keep in mind that you’ll get the promised sum of money only at the time of fixed deposit maturity. Most banks and financial institutions charge a penalty for premature fixed deposit. This can be from 0.5 to 1.0 percent.

Obtaining the Interest for the Fixed Deposit

When you deposit a lump sum amount of money to any bank or financial institution, you can get the interest applicable on the amount in two different ways.

You may get the interest on a monthly, quarterly or half-yearly basis. This type of deposit is termed as non-cumulative fixed deposit schemes. Here the interest won’t be compounded after regular intervals since you’re withdrawing the deposit.

You can also choose to obtain the whole interest amount at the time of fixed deposit maturity. This type of deposits is called the traditional scheme, reinvestment scheme, or cumulative scheme. In this type of deposit, the applicable interest is compounded on a quarterly or half-yearly basis. It’s re-invested in the deposit. You receive the principal amount along with the interest at the time of fixed deposit maturity. You can know about fixed deposit interest rate in India in 2017.

You should remember that the maturity value refers to the amount that you will get at the end of the deposit term. That’s also subject to tax deductions as applicable. The FD interest rate, the frequency of compounding and the interest calculations can change from one bank to another. Therefore, you should be careful about your decisions so that you get the best possible FD interest rate.

A fixed deposit of up to Rs. 1 lakh is secured under the Deposit Insurance & Credit Guarantee Scheme of India. Deposits kept in different branches of the same bank are aggregated to facilitate insurance cover. A maximum amount of up to Rs. 1 lakh is paid.

If you’re looking to make a fixed deposit, you should look for the bank that’s offers the highest rate of interest without keeping your money for an extended period of time. If you choose reliable concerns like Bajaj Finserv, you can deposit any amount of money between Rs. 50,000 to Rs. 5 crores where you can deposit for 12 to 60 months and also check how much you will receive one you FD mature through Fixed Deposit calculator .