How do I maximize my fixed deposit?
Use a Ladder Strategy for Your Fixed Deposit Investment
Opt for longer tenures: Generally, longer tenures offer higher interest rates as banks prefer to lock in funds for a longer duration. Invest in cumulative FDs: In cumulative FDs, the interest earned is reinvested along with the principal amount, leading to a higher rate of return at the end of the tenure.
Choose a cumulative FD. With a cumulative FD, the interest earned is added to the principal amount every month, so you earn interest on interest. Invest in a tax-saving FD. If you are eligible, you can invest in a tax-saving FD to save tax on your investment income.
- Deposit Duration: The shorter the tenure, the lower the interest rate, and the longer or medium-term tenure, the higher the interest rate.
- Deposit Amount: Higher deposit amounts, particularly bulk deposits above Rs.1 crore, will earn you higher interest rates.
It is advisable to avoid consolidating all your funds into a single fixed deposit. Instead, consider adopting a laddering strategy. In this approach, the investment amount earmarked for FDs should be divided, but across different FDs. Opt for a laddering strategy to gain more from fixed deposit investments.
For earning better returns, you can spread your investments across multiple fixed deposits with different maturity dates instead of locking all your funds in one fixed deposit for a longer period. This approach allows access to funds without breaking the entire investment.
- Step 1 – Check and Compare FD Rates. You must note that the rate of interest offered on FDs tends to vary from one financial institution to another. ...
- Step 2 – Pick Suitable Deposit Tenure. ...
- Step 3 – Choose a Frequency of Interest Pay-outs. ...
- Step 4 – Select a Mode of Deposit.
Rethink your FD investments
Various banks and non-banking financial companies (NBFCs) provide different rates, so compare your options. Select a term that aligns with your financial goals and evaluate how long you can comfortably commit your funds. It's advisable to invest only a portion of your savings.
Low returns: While fixed deposits provide stability, the returns are often lower compared to other investment options. For instance, the OA interest rate is currently 2.5%, whereas alternative options may offer higher returns.
Two credit unions pay over 7% APY on accounts right now: Landmark Credit Union and OnPath Rewards High-Yield Checking. However, these are both checking accounts with limitations on eligible balances. Plenty of high-yield savings accounts pay over 5% APY on your total balance without making you jump through hoops.
Which company gives highest interest rate for fixed deposit?
| Company Name | Credit Rating | Interest Rates (% p.a.) |
|---|---|---|
| Shriram Finance | ICRA-AA+/Stable IND AA+/Stable by India Ratings & Research | 8.18 |
| Kerala Transport Development Finance Corporation Ltd. | Guaranteed by Kerala Govt. | 7.00 |
| PNB Housing Finance Ltd. | CRISIL-AA/Positive CARE-AA/Positive | 7.85 |
DCB Bank savings account interest rates
DCB Bank offers up to 8% interest on savings accounts with balances ranging from Rs 10 lakh to less than Rs 2 crore. The bank pays 7.75% interest on savings account balances ranging from Rs 10 crore to less than Rs 200 crore. The rates are effective from September 27, 2023.
No, fixed deposit does not always provide a hedge against inflation, as the rate of interest offered may not always be at par with the rising inflation rates.
Reasons for investing in Fixed Deposits
It is risk-free and guarantees fixed returns. Fixed deposit interest rates are higher than other risk-free investment instruments like Treasury Bills or Government Bonds. Fixed deposits provide complete flexibility with regard to the tenure of investment.
| Investment amount (Rs) | Investment duration | General investor monthly interest (Rs) |
|---|---|---|
| 20 lakh | 1 year | 11,105 |
| 20 lakh | 5 years | 11,599 |
| 20 lakh | 10 years | 11,434 |
| 1 crore | 3 months | 39,427 |
| Banks | Interest rate for General Citizens Tenure (7 days to 10 years) | Interest rate for Senior Citizens Tenure (7 days to 10 years) |
|---|---|---|
| ICICI Bank | 3.00% – 6.90% | 3.50% – 7.50% |
| Bank of Baroda | 4.25% – 6.50% | 4.75% – 7.50% |
| Canara Bank | 4.00% – 6.70% | 4.00% – 7.20% |
| Bank of India | 3.00% – 6.00% | 3.50% – 6.50% |
What is the minimum and maximum amount that can be deposited in Fixed Deposit. Minimum amount varies across Banks and NBFCs. It normally ranges from ₹1000 to ₹25,000. There is no upper limit on the maximum amount that can be deposited in Fixed Deposit.
Suppose you invest in post office fixed deposit (FD) for 5 years. At present, the interest rate given on the FD is 7.5 per cent. In such a situation, when you divide the current interest rate by 72, the answer will be 72/7.5 = 9.6. According to this calculation, your money will double in 9 years and 6 months.
Generally speaking, banks deal with matured fixed deposits in either of the two ways: The FD is renewed automatically for the original term or a period of one year, depending on the tenure set by the holder. The principal and the interest amount are liquidated automatically and transferred into the holder's account.
As per the current Income Tax rules, the exemption limits vary based on the age and taxable income of the depositor. The exemption limit for TDS on FDs is Rs 40,000 for individuals excluding senior citizens. This means TDS will not be deducted if the interest earned on an FD in a financial year is below Rs 40,000.
How to invest smartly for beginners?
- Decide your investment goals. ...
- Select investment vehicle(s) ...
- Calculate how much money you want to invest. ...
- Measure your risk tolerance. ...
- Consider what kind of investor you want to be. ...
- Build your portfolio. ...
- Monitor and rebalance your portfolio over time.
Is FD safe from hackers? Yes, fixed deposits are safe from hackers as they are not directly accessible through online transactions. Can you lose money in a fixed deposit? In most cases, fixed deposits are considered safe, but sill there is very little risk of losing your money.
Can you live off interest? It's possible, but it isn't realistic for everyone. Living off of interest relies on having a large enough balance invested that your regular interest earnings meet your salary needs. Rest assured that you don't need to earn a million dollar paycheck to reach your goal.
Locked-in feature With FDs, the money is locked in for the deposit tenure. While premature withdrawal is permitted, it may come with a penalty. Such penalties are charged on the interest income.
Can A Fixed Deposit Improve CIBIL ™ Score? The CIBIL ™ score depends on the repayment history of the customer. So, taking a fixed deposit will not impact your CIBIL ™ score directly. But, you can always take a secured credit card against the existing FD and make timely payment of bills to improve your CIBIL ™ score.
