What Are The Types Of Bank Deposits?
A Bank Account serves several purposes for anyone planning their finances. The most important ones are safety, convenience, and savings. Traditionally in India, we have two significant Bank Deposits: Fixed and Recurring, each with varying advantages.
Fixed Deposits
An FD is an investment avenue offered by banks with guaranteed returns as interest rates between 3% and 9%. It provides higher interests than Savings Accounts and comes with tenures ranging from a week to 10 years. You should open this account when you want to build your investments, and your risk appetite is relatively low with guaranteed returns.
You cannot make any premature withdrawals, but you can shut down the deposit prematurely. However, pay the penalty in case of early closure FD Account closure.
Recurring Deposits
This is a Term Deposit where you need not deposit a lump sum of savings but a fixed sum (which can be as low as Rs. 500). The interest rates range from 5% to 7%. These accounts have maturities between six to 10 years. You can also give a standing order to the bank to withdraw a fixed sum from your Bank Account on a fixed date and credit it to the Recurring Deposit. However, the bank may charge a penalty for delay in paying the instalments.
Current Accounts
This account deals with lower restrictions than a Savings Account concerning withdrawals and transactions. You should only open these accounts if you have a small business with multiple daily monetary transactions. Banks also offer overdraft facilities. They let accountholders withdraw more money than required. Moreover, there is no minimum balance required, unlike other Bank Accounts.
Savings Accounts
You can open this account with any bank offline or online through the Banking app to earn interest on the balance maintained. Nowadays, they are highly liquid and fulfil multiple purposes like paying bills, quick transactions, easy credit, etc. You should research well on the account types before opening.
Different from other investments
The banking system helps channel funds from savers to borrowers by taking deposits and offering Loans. A Fixed Deposit offers pre-decided returns that do not change throughout the investment tenure, but Mutual Funds provide better returns on long-term investments as they link with the market.
With the advancement of digital payments, banks also offer these accounts unique online banking facilities that contribute to developing businesses in the economy.FD, FD Account, Fixed Deposit
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