8 Must Know Factors: Things To Consider Before Investing In Fixed Deposit

We have heard several financial experts saying Fixed Deposits (FD) are the safest options for investment with a fixed return. You only need to open an FD account and add a lump-sum amount to it. However, much like every other investment option, you need to be careful about investing in FD as well.

Here are a few things you must note,

Interest Rate

The first thing you will compare among various options of FDs is the interest rates they are offering. Each bank offers a different interest rate along with other benefits. Depending on your financial goals, you must pick an option that would suit your needs the best. You must trust reputed banks when it comes to investing in an FD.

Minimum Account Balance

When it comes to opening an FD account, you must know the lower investment limit. Each bank has separate criteria when it comes to the minimum balance you can maintain in the account.

Most banks facilitate account holders to start the FD with an amount as low as ₹10,000. If you are opening an account in the name of a minor, the minimum amount can be ₹2000. You can use a Fixed Deposit calculator to understand how much will be the return on your investment in a fixed period.

Premature Withdrawal Penalty

Most FDs require you to invest for a definite period. Hence, if you request a premature withdrawal, you might be penalised. Therefore, it is crucial to understand what is the premature withdrawal penalty that the bank has set. Some might be high, while others could be low.

FD Tenure

If you invest in FD, you should also check the tenure for which the bank will offer a return on your investment. From a week to 10 years, banks have different options these days. You can speak to an expert about these and compare your options to suit your financial goals (Financial Goals To Have In Your 20s).

Interest Payout

When investing in FD, the goal is to earn interest over the deposited amount. You can choose to receive that payment monthly, quarterly, half-yearly, and annually depending on which option you pick. You must speak to the authority in the bank regarding this and select the interest payout frequency according to your choice.

TDS Declaration

You must note that the bank is entitled to levy Tax Deducted at Source (TDS) if the interest payout exceeds ₹10,000 per year threshold. If you fulfil the criteria for no income tax bracket, you will have to submit either a 15G Form or a 15H Form.

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Maturity Date

When looking for options to invest in an FD, you must also ask your bank to provide clarity on the maturity date, especially if you are opening an account for a specific purpose. It will help you with financial planning and make sound decisions when it comes to money.

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Auto-Renewal

Some banks now offer auto-renewal of FD (Fixed Deposit For Millennials) post-maturity date if you are not willing to withdraw the entire amount. It is a good option if you plan to continue your investment for a longer duration. It saves you from the hassle of starting another FD account.

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