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Fixed Deposits vs. Recurring Deposits: Know The Differences Here

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Fixed Deposits vs. Recurring Deposits: Know The Differences Here

Fixed deposits and recurring deposits are the preferred investment options for many investors as both of them offer high returns and are amongst the safest investment options in India. There are many similarities between the two as both of them provide assured returns, have same taxability terms and can be availed at reputed banks and non-banking financial companies. However, it can be confusing to decide which option is best suited for your needs. Therefore, you must go through their differences to understand which one of them is a better option.

Here are a few differences between difference between RD and FD that can help you understand the things.

Investment method – which of these offer flexibility in investment terms?

Fixed deposits allow you to deposit the principal amount at once while in the case of recurring deposits, you have to deposit the principal amount in a recurring manner on a monthly basis spread across the investment tenor.

You can select an FD that is best suited for your investment profile after comparing different FD schemes using an online FD calculator. Depositing a lump sum amount in FD will fetch you assured returns at a predetermined interest rate. With financiers like Bajaj Finance, you can avail the advantage of flexible tenors to ladder your investments across multiple FD schemes and benefit from fluctuations in interest rates. Hence, FDs can help you build a substantial corpus over a period of time.

In a recurring deposit, you can decide to invest a fixed amount that you can save from your monthly income. You can invest an amount as low as INR 100 on a monthly basis, and the tenor can be set between 1 to 10 years based on your convenience.

Interest rates- which of these fetch higher earnings?

Apparently, there is not a huge difference in the listed interest rates for fixed deposits and recurring deposits. However, the difference lies in the way the interest amounts are calculated.

A fixed deposit will incur interest on the entire principal amount which is deposited while opening the FD account. Therefore, you will earn attractive returns on the maturity of your FD especially if you choose a cumulative FD that compounds the interest generated over the tenor.

In case of a recurring deposit, the interest amount is calculated on a monthly basis on the principal amount. You miss out the interest with each passing month. You will earn interest for the entire tenor only for the first recurring deposit. The interest amount keeps getting diminished for the subsequent months.

Hence, you will earn higher returns with fixed deposits as compared to recurring deposits. The effect is magnified for FDs with longer lock-in periods.

Which one should you choose?

Both RDs and FDs are safe and attractive investment instruments that strengthen your investment profile. You can choose RD if you do not have a sizeable amount to invest in one go. However, you can invest in FDs if you can invest lump sum money at once. Also, if you wish to use your FD as an income generating tool, you can choose a non-cumulative FD that allows you to earn your interest earnings in the form of monthly or quarterly payouts.

NBFCs like Bajaj Finance provide a wide range of fixed deposit options that offer high-interest rates up to 8.75%. Senior citizens can avail the benefit of higher interest rates. It offers a flexible tenor of 12 to 60 months for fixed deposits. With a minimum investment amount of INR 25,000 and online application process via Experia- your online fixed deposit account, it’s easy to open Bajaj Finance Fixed Deposit account from the comfort of your home.

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