Fixed deposit or recurring deposit? A plain comparison
Both are the same promise from the same bank. The difference is whether you have the money now or will have it monthly.
Deposits are the least exciting savings product and, for a lot of goals, the most appropriate one. They do one thing: return your money with a known amount of interest, on a known date.
The difference in one line
A fixed deposit takes a lump sum now and holds it for a fixed term. A recurring deposit takes a set amount every month for a fixed term. Both pay interest. Both return the total at maturity.
If you already have the money, a fixed deposit. If you are building it from monthly income, a recurring deposit. That is genuinely most of the decision.
Where each one fits
| FIXED DEPOSIT | RECURRING DEPOSIT | |
|---|---|---|
| You need | A lump sum upfront | A monthly amount |
| Good for | Money already in hand you will not need soon | Building a sum from regular income |
| Interest | Calculated on the whole amount from day one | Calculated on each instalment from when it is paid |
| Early exit | Possible, usually with a penalty | Possible, usually with a penalty |
| Typical use | An emergency fund, a known future expense | A savings habit with a target in mind |
The things worth checking before you open one
- The tenure. Pick one that matches when you will actually need the money, including a deposit early costs you part of the interest.
- The penalty for early withdrawal. It varies by bank and is rarely mentioned at the point of opening.
- Tax. Interest on deposits is taxable, and TDS may be deducted once interest crosses a threshold in a year. Submitting the right declaration can prevent deduction if your total income is below the taxable limit.
- Whether you need a monthly payout. Most banks offer either cumulative interest or periodic payout. Retired savers often want the latter.
- Deposit insurance. Bank deposits are insured up to a limit per depositor per bank. Worth knowing if you hold large sums in one place.
Worth knowing
Deposits are safe and predictable, and their returns are usually modest once inflation is taken into account. They are excellent for money you will need in a defined period, and a poor home for money you will not touch for twenty years.
See where you stand
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