You are bound to experience conflicting thoughts while selecting between a fixed deposit and a savings account as your next big investment move. However, under any circumstance, we would always recommend persisting with FDs, regardless of the tenure, in case you are looking to park the surplus funds in a relatively safe instrument.
In the subsequent sections, we shall take a look at some of the best reasons why a fixed deposit trumps a savings account when flexibility and corpus growth are concerned.
- Better Interest Rates
In case you seek fund appreciation, an FD is a much better choice when compared to a savings account. In most cases, banks offer an interest rate of 3.5 to even 4 percent on savings account whereas a majority of FDs attract something in the ballpark of 7 to even 8 percent. Certain NBFCs are known to offer higher rates, including the likes of PNB housing finance FD, which automatically makes this a more productive form of investment.
- Better Prospects for Senior Citizens
When it comes to investments made by senior citizens, a typical savings account doesn’t come with any specific benefit. However, an FD goes out of the way and offers better interest rates to the seniors with a significant increase of up to 1 percent.
- Flexible Payouts
An FD ensures that you can opt for incremental and periodic payouts, based on individual preferences. Unlike a savings account, non-cumulative FDs can be relied upon, in case you want monthly, quarterly, or any other form of interest payout to suit your financial well-being.
Parking money in a savings account hardly comes with an additional set of benefits, barring banks sending out pre-approved credit card offers. An FD, in comparison, is way more flexible and customizable as it allows you to tailor tenure, payout, laddering, and other aspects, sans hassles. Certain financial institutions, like the PNB housing finance FD, also support systematic deposits, thereby minimizing financial stress and allowing you to invest, as per convenience.
- Pre-emptive approach
A fixed deposit allows you to pre-empt the expected corpus as it isn’t subject to market risks and financial uncertainties. Therefore, if you are aware of the existing FD rates and even the compounding options, activated after certain tenure, you can easily calculate the interest rates, periodic payouts, or the cumulative sum, using an FD calculator.
- Better Options for NRIs
Non-resident Indians can rely on FDs to saving a substantial portion of their foreign earnings. While an NRI can also open a savings account as per the NRE or NRO standards, an FD is a more lucrative option, if and when income parking is concerned.
While these are some of the primary reasons why you should choose fixed deposits over conventional savings accounts, the former is considered immune to the financial threats and existing challenges. Moreover, while the savings interest rates are quite standard across financial institutions you can always search for the bank, HFC, or NBFC that pays the highest FD rates and compare options, before taking the plunge. s