Fixed Deposits are the most prominent and popular financial instrument where one deposit a lump sum amount to get a fixed interest on the deposited amount on a regular basis. Most of the people don't know about the types of fixed deposit one can open to attain different types of financial freedom for their life. Fixed deposits can be opened in banks, financial institutes or through post offices as one likes. We will point out some of the most popular fixed deposits that can be opened for different financial goals.
1. Regular Fixed Deposit: This type is the standard and most popular among people. In this, the amount is saved as a lumpsum for fixed tenure ranging few days to long term in years which will yield you more fixed interest. Higher fixed interest rate for longer period of fixed deposit amount.
2. Senior Citizen Fixed Deposit: Now a days, many banks, post offices or financial institutes offer senior citizen fixed deposit scheme and these schemes are targeted for above 60 years of age for any individual. These type of fixed deposit comes with higher interest rate to comply with financial needs of the seniors.
3. Tax-Saving Fixed Deposit: This type of saving is also called Tax-saving FDs or 5 year FDs. These come in lock-in periods which is 5 years. Investments done in this is FDs are eligible for Tax-savings under income-tax act in India. The disadvantage of this type of FDs are their restrictions for premature withdrawals.
4. Cumulative Fixed Deposit: This type of FDs are used particularly when you have some extra cash which you will not need in near future because this type of FD does not payout periodically rather gets invested with the principal amount for the tenure. You only get the amount when the tenure gets over. This type of FDs are good option for increasing your growth over long time.
5. Non-Cumulative Fixed Deposit: Different to what cumulative fixed deposit, this is more flexible as one can get the interest on a monthly, quarterly, half-yearly or annual basis. The interest paid out can be considered as fixed income on a regular basis.
6. FD Receipt (FDR) or Electronic-FD Receipt (E-FDR): These are only two different terms used for offline and online to obtain the certificates by the banks on your fixed deposits. Both serve the same purpose but E-FDR is much more convenient for online transactions.
7. Corporate Fixed Deposit: These types of FD comes with or offer higher interest rates compared to banks and other financial institutes but comes with high risk. Investing in these types of Corporate Fixed Deposit should be done with lots of research and by checking the credit worthiness of the lender
8. Flexi Fixed Deposit: This type of FD can provide you with withdrawing partial amount from your fixed deposit. The remaining amount in the FD will incur continuous interest throughout the tenure. This FD gives you the flexibility to withdraw partial amount before the tenure ends.
9. Special Fixed Deposit For Children: Some of the FD schemes are designed for children through banks or other financial institutes. These are designed with some features like education or higher studies which can incur higher interest rates or even a lock-in periods until a child reaches certain age.
10. Sweep-In/Sweep-Out FD: As of today, banks provide you a sweep-in/sweep-out FD facility on your saving or current account. Any amount above your instructions in your bank account will be transferred to FD to earn higher interest and when you need the amount back, the FD's are broken and the needed amount will be transferred to normal savings or current account.
Before you open any of the above Fixed Deposit Account, one should always consider his or her own financial goals, liquidity, needs and wants and the interest rates you will get. Additionally, the terms and conditions also play a crucial role while opening a Fixed Deposit Account including the penalties of premature withdrawals. Take an informed decisions if and when you plan to open a Fixed Deposit Account anywhere.
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