Benefits of Fixed Deposit you perhaps didn’t know
With the increased limit of Tax-Saving Fixed Deposit up to Rs.1.5 lakhs, everyone is rushing to get more benefit. But there are few extra which you might want to know before making a fixed deposit.
Fixed Deposit at Floating Rate
Generally deposits are freeze at a fixed rate for fixed term but there are few banks and non-banking finance companies (NBFCs) that offer deposits at a floating interest rate.
For Instance IDBI and IOB (Indian Overseas Bank) offers Term Deposits at Floating rate in which interest rates are declared every quarter i.e. on April 1, July 1, October 1 and January 1 every year.
Reinvestment of Interest
Some banks offer the facility of reinvesting the interest earned on Fixed Deposit at the prevalent interest rates.
For example you get Rs.5,000 interest every quarter. So bank will make a new FD at the prevailing interest rate of Rs.5,000 every quarter and you will get the money at the maturity of original Fixed Deposit.
Premature withdrawal of Fixed Deposit attracts penalty but there are some banks who do not charge penalty on withdrawing money before maturity.
Ingvysya FD Plus is one such plan which offers zero pre-closure charges i.e. Fixed Deposit can be broken at any time without any penalty.
Mostly Fixed Deposits are made for a particular purpose such as for child marriage or to buy some expensive items etc. but many times these things get postponed and depositor might want to extend the term of the Fixed Deposit. In this case the depositor has to wait for the maturity and then reinvest it at the prevailing interest rate. The interest rates could be lesser.
Some banks offer deposit that allows depositor to extend the term of FD without major changes in other conditions.
Fixed Deposit with Insurance
Fixed Deposit does not only increase your wealth but also take care of your health. Some banks provides accidental insurance policy with bank fixed deposit.
One such product is provided by DHFL. Depositor will get accidental death insurance of Rs.1 lakhs and for the first depositor in case Fixed Deposit is held jointly.
Adding and Breaking fixed deposits
Multiple Deposit of smaller amount for each purpose is a cumbersome process which involves large paperwork.
Banks have introduced products where a bulk deposit is divided into deposits of smaller denominations according to the depositor’s requirements.
Conclusion: Fixed Deposits is a great investment scheme but one must gain knowledge about every possible feature to get highest returns.