How to make the most of your Bank Fixed Deposits

5 MinsAug 13, 2021

A Bank Fixed Deposit is an important investment avenue. It should form a part of your investment portfolio because if offers fixed returns and is easy to liquidate or withdraw in case of an emergency.


Benefits of investing in FDs:

  • Meet your short-term financial goals
  • Use it to build an emergency fund for any unexpected expense
  • Save for specific goals by matching the tenure of the FD to your goal
  • Use it as a collateral to take a loan at a lower rate of interest
  • Save tax by investing in 5-Year tax saver FD

Here are some tips to get the best out of your investment in a bank FD

Link your savings account with a bank FD. The money could be automatically transferred into a fixed deposit from your Savings Bank account when the balance in it crosses a certain amount, say Rs 25,000. Axis Bank’s Auto Fixed Deposit can be linked to your Axis Bank savings account facilitating automatic transfers in multiples of Rs 5,000 to a fixed deposit.

Alternatively, you may choose to do a recurring deposit from your Savings Account. This would instil the needed financial discipline and ensure regular savings. Choose your FD’s tenure to match the time for your goals. Besides, choose between the cumulative plan and monthly or quarterly interest pay-out plans taking into account your liquidity and cash-flow requirements.

Say you’re planning for a short-term goal which is just a few months from now, book a short-term fixed deposit. On the other hand, if you’re planning for a long-term goal, choose a longer tenure FD. In both cases, opt for the ‘reinvestment of interest’ plan so that you compound money better. Under this option, the interest is automatically re-invested in the principal amount at quarterly intervals, giving you a higher return.

[Also Read: Have you put your money on auto mode?]

If you would like to draw a regular source of income, opting for monthly or quarterly interest pay-outs directly to your bank account will help manage your cash-flow needs.

Lock-in money via a bank FD when interest rates are competitive so that it can yield a better rate of return and possibly counter inflation. That said, be wary of banks offering extraordinarily high interest rates – as you could be risking your capital.

Avoid prematurely withdrawing your FD. Premature withdrawals hinder the wealth creation process and put brakes on the power of compounding. And in case you need the money (for whatever reason) before maturity, you can always avail of a loan against your bank FD.

If your existing bank FDs are maturing and you do not require the money immediately, make it a point to renew them. Renewal will ensure that your money continues to compound and create wealth for you.

A bank FD is a secure way to generate wealth and add to your financial security.

Investing in a bank FD is convenient and hassle-free. You can choose to do it online with a Digital Fixed Deposits (via internet banking or mobile banking) or offline, depending on what is comfortable for you.

Book your bank FD today!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN 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.