3 MinsMar 16, 2023
Bank Fixed deposits have traditionally been one of the most popular investment options. They offer risk-free returns since the interest rate is fixed for a pre-defined period. Hence, they are suitable for conservative investors, especially senior citizens for whom Fixed Deposits can act as a source of stable income in their post-retirement years. Even investors who have a higher risk appetite should invest some portion of their surplus funds in Fixed Deposits to balance their investment portfolio.
To make the most of your investment in a fixed deposit, you must take care to select the right one. It is because the banks offer different kinds of FDs. Let us look at some of the FDs available to investors.
1. Regular Fixed Deposits:
In this type of FD, the investor parks the fund for a fixed period ranging from 7 days to 10 years. The interest rate offered is higher than saving bank deposits. Depositors can avail of loans and overdraft facilities against these deposits. These can be withdrawn earlier than maturity with a penalty of lower interest.
2. Tax-saver Fixed Deposits:
Investment in this type of FD qualifies for a deduction of up to Rs. 1.5 lakh from the taxable income, under Section 80C. The interest on this FD is taxable. There is a mandatory lock-in period of five years and thus, the tax-saver FD cannot be withdrawn prematurely. Loans and Overdraft facilities are not available in this type of FD.
3. Digital Fixed deposits:
You can open this FD online instantly without any physical documentation. If you are a non-Axis Bank customer, you can open a Digital FD with PAN and Aadhaar verification and video KYC. You can fund with a savings account from any bank.
4. Reinvestment Fixed Deposits:
The interest on these FDs is compounded as per your chosen interval. It is added to the balance and is paid on maturity.
5. Senior Citizen Fixed Deposits:
These deposits are only for investors who are older than 60 years. The interest rate on these FDs are 0.75% higher than standard FDs. The tenure can range from 7 days to 10 years.
6. Fixed Deposit Plus:
These are deposits that give a higher rate of interest in comparison to regular FDs. The minimum amount of investment in these deposits is higher. Additionally, investors have the option to choose between simple interest and compound interest. Please note these deposits cannot be pre-closed.
7. Auto Fixed Deposits:
These FDs give the investors the convenience of savings accounts and interest rates on deposits. In this type of FD, you can set a certain threshold amount to be kept in your savings account. The rest of the amount automatically goes into the FD, thereby earning a higher interest rate. The auto fixed deposit shall be broken whenever there is a fund requirement in your savings account.
[Also Read: Know why you should hold multiple Fixed Deposits]
How to choose the right FD?
While there are different types of FDs available, you should select the suitable one based on the following factors.
1. Interest rates:
Check the interest rate that the deposit is offering. Different banks offer different interest rates. Typically, longer tenure FDs and higher investment amounts fetch higher interest rates.
2. Premature withdrawal facility:
Banks typically charge 1% lower interest on premature withdrawal. Choose a bank with a lower penalty or with premature penalty features.
Select the tenure of the FD to match your financial goals to avoid premature withdrawal.
4. Provider soundness
FD is a relatively risk-free investment. You should check the credit ratings and financial position of the bank or NBFC before committing the amount to a deposit.
Check if it is possible to open the FD online as it will save you time and hassle.
Reasons to Invest in Fixed Deposits
- This is a safe investment for risk-averse investors.
- Having visibility on the fixed interest rate and maturity amount helps in better financial planning.
- A loan and overdraft facility is available on investments.
- Senior citizens can earn a higher rate of interest.
- A tax exemption of up to Rs. 1.5 lakh is available on the tax-saver FD.
Finally, we can say that there are many investment options available for investors today. Few can beat the safe, risk-free return that is offered by Fixed Deposits. Based on the factors above, choose the right FD in the right bank and let your money work for you. You can check Axis Bank Fixed deposits and select the one meeting your requirements.
You can also learn how to use the FD calculator online!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.