Why is An FD Always Better than Savings Account?
savings account
A savings account is an instrument that many investors used to park their money by default.
Earlier, savings accounts used to offer nominal interest rates but with time, banks and finance companies have started offering better interest rates on a savings account.
However, parking all the money in a savings account might not be a wise approach, especially when there are better earning opportunities in the market.
Instruments like fixed deposits offer the same level of security for your deposited amount as a savings account does.
Moreover, they even provide a much better interest rate than it.
Here are some of the reasons that make FDs better than savings accounts:
Assured returns with a better rate of interest
The higher interest rates offered by fixed deposit plans enable you to earn much more returns than a savings account could provide.
Even a short term FD can provide better returns as compared to a savings account. FDs are unaffected by market fluctuations and therefore, you don’t need to worry about the safety of your deposited money.
The difference between interest rates of bank FDs and savings accounts have diminished rapidly this year as the banks were forced to cut down their FD interest rates owing to the economic instability and repo rate cuts implemented by the RBI.
However, the interest rates offered by corporate FDs i.e. FDs offered by finance firms are still on the higher side.
For instance, Bajaj Finance is offering an FD interest rate of up to 6.85% that is one of the highest FD rates in the market currently.
Moreover, its FD plans are safe from market risks and the high credit ratings provided to them by credit rating organizations confirm that.
Managing expenses
A savings account allows you to withdraw money freely whenever you need it. However, this also means that your investment will be disturbed frequently and you will not be able to grow your savings at a steady rate.
Instead, you can park a chunk of your savings in a non-cumulative FD that offers periodic interest payouts.
The periodic interest payouts will enable you to manage your regular expenses conveniently without having to disturb your investment.
The non-cumulative FD offered by Bajaj Finance offers monthly, quarterly, six-monthly, and yearly interest payouts.
Also, you can apply for a loan against your FD in times of financial emergencies.
It means that your deposits can continue to grow without a break and you will also be able to use the interest payouts to fulfill some of your basic fund requirements.
FDs are customizable
FDs are customizable i.e. you can tailor it as per your investment needs. It becomes possible as financiers offer different tenor options and features to suit different types of customers.
For example, Bajaj Finance is offering a complete end-to-end online procedure for investing in an FD.
An online FD form is available on its portal and even the documents can be verified online via the cKYC process.
Also, a 0.10% extra FD rate is offered on using the online investment alternative.
A tenor ranging from 12 to 60 months can be selected as per your convenience. Also, you can ladder your deposits easily by using the multi-deposit facility from Bajaj Finance.
If you don’t need the periodic interest payout, you can invest in a cumulative FD to compound your returns steadily.
You can also renew the FDs automatically by selecting the auto-renewal option while filling the FD form.
A 0.25% additional interest rate is offered to citizens who are older than 60. An FD calculator that is integrated on its portal can be used for calculating the returns precisely.
Since all these options are not available with a savings account, an FD proves to be a better investment option for everyone.
Both savings accounts and fixed deposits are risk-free instruments. However, to earn at a higher interest rate, you should park your savings in a fixed deposit account.
Apart from higher returns and safety of the investment, a fixed deposit also provides better options like periodic interest payouts that help you to manage your expenses without disturbing your investment.
Also, an FD can be tailored according to your investment needs and plans. Bajaj Finance FD not only provides a higher FD rate but also provides a flexible tenor and options like online investment procedure and multi-deposit facility that help you to grow your investment without any hassles.
Author Bio:
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.
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Category: Family Finances
