When you invest your hard-earned money, you want maximum returns with minimum risk. Fixed deposit interest rates can help you to grow your funds with minimal risk as they are not linked to market performance. And therefore, most individuals, including working professionals, prefer FDs.
For working professionals, holding a good portion of their savings in bank fixed deposits (FDs) is an excellent option. At the end of the FD tenure, they get the principal and total interest earned on the funds invested.
Here are a few useful tips for working professionals to get the most out of their FDs.
– Know the Minimum Deposit
Early investing is always good for accumulating funds in the long run. Working professionals can start investing their savings early with a minimum deposit. Fixed deposits do not restrict investing a small amount or a big amount. You can start your investing journey with as low as Rs.1000 and can go up to Rs.2 crores.
– Invest in the right type of FD to maximise the returns.
An FD can be a cumulative or non-cumulative FD. A cumulative FD offers you higher interest with compounding power. To increase your FD returns, you can choose a cumulative FD. Interest is calculated quarterly. The interest accrued each quarter will be added to the principal and reinvested. You will get the total accumulated amount (Principal and Interest) at maturity.
– Understand FD Tenure
Fixed deposits are considered risk-free investments, as once you deposit the funds, the fixed deposit interest rates will be fixed for the entire tenure. FD tenures are flexible – ranging from 7 days to 20 years with banks. The longer the tenure, the better the return on your FD due to the compounding effect and without any effect of economic factors.
– Find a Bank offering a High-Interest Rate
FD interest rates vary with different banks and other financial institutions. You can earn high-interest amounts at a rate of up to 7% with renowned banks. Based on your investment amount, duration, interest payout frequency (monthly/quarterly/reinvesting) and type of FD, you can get a significant amount at the end of FD maturity. You can use an online fixed deposits calculator to know the applicable interest rate on your FD.
– Invest in Multiple FDs
Many times, working professionals need funds on an urgent basis, and they may have to withdraw funds from their FDs. It will reduce their interest amount. The bank may penalise their interest rate by 1%. To avoid such loss, you can ladder your FDs and invest your funds in more than one FD with a different maturity date. If you need urgent funds, you can withdraw an FD without affecting the returns from other FDs with a different maturity date.
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– A Facility of Credit Card Against FD
An option to save any loss on your interest amount is a Credit Card against FD. When you need urgent funds, you need not prematurely withdraw funds from the FD. You may choose a bank offering this facility. You can apply for a Credit Card against your FDs. However, you should check if the interest rate is lower than the penalty on the premature withdrawal.
Thus, there are various advantageous features of bank FDs for working professionals. Utilise online calculator fixed deposit provided by banks to know returns for different tenures and deposit amounts.
