Keep These Things In Mind Before Investing In Fixed Deposit
Fixed deposits are one of the safest, easiest, and lucrative investment options available to investors by most banks or NBFCs. It gives stable returns at lower risks. Fixed deposits help individuals to manage their financial risks and provide security against unexpected expenses. The rates of fixed deposits are also higher than a regular saving account. Investors find it easy to withdraw the amount after the completion of the maturity period. Since the money is invested for a predetermined duration, they are also known as “Term deposits”.
If you are also thinking of investing in fixed deposit services, here are a few things that you need to keep in mind. Let’s take a look:
- Opening an FD Account — The very first thing that you should know is to open an FD account. You can open an FD account with the same bank with which you have a saving account. Some banks also offer the facility of opening an FD account even if you do not have a savings account with the bank. The bank will conduct a simple “know your customer (KYC) process” for which you may be required to provide ID proof such as PAN card or Passport etc., photos, and original documents for verification.
2. Minimum Deposit Amount — Several banks and fixed deposit services have their set of minimum and maximum deposit limits so it is a wiser idea to check on with them about the same before taking further steps.
3. Tenure of FD — The next important thing is to find out the duration of the deposit before investing in any type of fixed deposit. Most of the banks offer deposits for a period between 1 year and 10 years. The task of choosing FD tenure should be done carefully as if you perform a premature closure of an FD, you can be imposed a penalty leading to reduced interest earned on your deposit.
4. Fixed Deposit Rates — Since the offered interest rates vary from bank to bank and depend on the period of fixed deposit for which you are investing, it is essential to conduct a thorough check on the rates and make the final decision after comparing them with the rates offered by different banks.
5. Interest Payouts — With various types of FD investment options, you have an opportunity to select the interest payout frequency. You can choose between the two types of payouts in fixed deposit schemes like cumulative and non-cumulative depending on your requirements. You can go for a non-cumulative FD if you want a regular source of income on a monthly, quarterly, half-yearly, or annual basis. Or choose the cumulative FD if you are seeking long-term savings and returns on maturity on principal and accumulated interest.
6. Penalty On Premature Withdrawals — Various Fixed deposit solutions come with early withdrawal facilities to enable individuals to perform a partial or complete withdrawal from an FD account before the maturity date. If due to an emergency, you are in need to withdraw your FD before the maturity date, the bank may impose a penalty on premature withdrawals. So, you need to check this penalty before opening an account.
7. Nominee Requirements — When you open a fixed deposit account, the banks give you the facility of having a nominee. This is an advantageous procedure for the investors in case of any adverse situations. In this case, the deposited amount of an FD will be transferred to the nominee.
Read Application Form -After choosing the FD service provider, you will be asked to fill an application form and sign. Read the terms & conditions of the facility carefully and ask your banker in case of any doubt. This will increase your confidence about investment.
Conclusion
These are some of the essential things which every investor needs to keep in mind while making an investment decision. Fixed deposit services are a good option to invest in to gain good returns and lower risks. These tips will help you fulfill your long-term financial goals and ensure savings.
