Grow your money with our Fixed Deposit account. Our competitive interest rate of up to 6% p.a. On your savings will have you reach your goal faster. The interest applies to local and foreign currencies; and will only be accrued if the money remains in the account for the agreed tenor. HDFC Bank Fixed Deposits and the interest on them are a good source of income – in a safe and assured manner. Choose a tenure and amount of your choice to grow your income in a steady fashion. You can open an FD for as less as ₹ 5,000, and use it as a back-up for your savings or current account with Sweep-in and Super Saver Facilities.

Securing future and protecting themselves from financial loss can only be possible with some smart investments. These smart future investment ideas need to be executed by the source of investments. And one of the main source of investment with fixed interest rates and higher return is fixed deposits. The fixed deposits are one of the ideas for a safe investment plan with fixed interest rates. In this type of investment, the investors shouldn’t worry about the risk because there is no risk in this form of investments.

What is a Fixed Deposit?

Fixed deposits are one of the safest form of investment. In this form of investment a person holding a savings bank account in a financial institutions, government and private banks can keep a lump sum of amount in a fixed deposit. And on that fixed amount there will be a certain percentage of interest rates are levied. And this levied charges will be added to the principal amount deposited. Moreover, the final amount will be withdrawn only at the time of maturity. Which is at the end of the fixed period of time.

How Fixed Deposit Bank Accounts work?

As a matter of fact the rules and regulations are levied on a fixed deposit accounts are based on the government orders. Therefore, all the procedures involved in this fixed deposits are liable under the act of government policies.

1) All deposits will be liable for a certain percentage of interest

When it comes to fixed deposits, it is termed as an investment because of the added interest. The added interest will be based on the term of the fixed deposit account. A person investing or assuring a fixed lump sum amount needs to be aware of the fixed rate of interest levied on the principal deposits.

Also Read : What is a Recurring Deposit ?

2) Interest levied on the basis of the tenure

All fixed deposit accounts are calculated with a rate of interest added to the account, on the basis of the entire work structure of the fixed deposit account. Therefore, if a person invested fixed deposit for 3 months, then the rate of interest will be levied on the amount for an interest rate supporting 3 months.

3) The fixed deposit amount cannot be withdrawn before the maturity period

A person investing in a fixed deposit needs to plan their deposit tenure clearly. And that is because if the person decides to withdraw the amount, it is not possible to withdraw any kind of money from the account. Therefore, a person need to keep it for a period of time, which can be feasible for them.

4) Penalty charges will be added for breaking the account in advance

It is not easy to break a fixed deposit account well in advance. And if it is broken, then some part of the penalty will be charged at the time of withdraw. These percentages of penalty will be charged at principal fixed deposit.

5) Assured value of return

As mentioned several times that fixed deposit accounts are a risk free source of investment. This risk free zone creates an assured rate of return at the end of the completion period. Therefore, a person investing in a fixed deposit will be gaining an assured return at the end.

6) Supports savings and safeguards the deposit for a period of time

One of the major positive points of fixed deposit account is that it can be kept for a period of time without any debit. It encourages people to deposit their money as a fixed deposit as it safeguards that amount from unnecessary spending.

At the end, these fixed deposit accounts are a risk free source of investments. And some of the points mentioned above regarding fixed deposits can be beneficial for future investment purposes.

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Just as every business operates to earn profits, every individual works to earn money. Money today is minimally maintained in physical form of actual cash but is actually maintained digitally in bank accounts. Banks provide a digital account to its customers in which they can keep their money for safekeeping as well as earn compensation in form of interest on the deposited money. Certain type of bank accounts utility extends beyond safekeeping of money and can also be used as investment tools by customers. Depending on the customer’s specific needs, the appropriate type of bank account is chosen.

This article looks at meaning of and differences between two types of bank accounts – savings account and fixed deposit account.

Definitions and meanings

Savings account:

A savings account is a bank account maintained by a customer to deposit his personal savings as well as to undertake personal monetary transactions. Safekeeping of money with high liquidity is the primary purpose of maintaining a savings account. Earning interest on the deposited money is the secondary purpose.

Customers deposit their personal earnings in a savings account and also make their personal payments through their savings account. A savings account thus cannot be opened by a business entity but only by an individual or association of individuals.

Banks require customers to maintain a minimum balance in their savings account, failing which they may charge some penalty. Banks also pay nominal interest to customers on the balance maintained in their savings account. This interest is generally calculated on the average balance on a quarterly basis and credited to the savings account of the customer itself.

Fixed deposit account:

A fixed deposit account is an account of customer maintained with the bank in which money is deposited with him for a specific, defined period of time during which the money cannot be withdrawn.

A fixed deposit account is a type of investment made by the customer with the specific bank with the primary purpose of earning interest. Every fixed deposit has an interest rate that is associated with it depending on the tenure of the fixed deposit. The longer the tenure, the higher the interest rate. Tenures can range from as little as 30 days to as much as 10 years.

When a customer opens a fixed deposit account, he chooses the tenure and deposits the determined sum of money for which he is given an acknowledgement termed as ‘fixed deposit receipt’ as a proof of his investment. Customers are generally not allowed to withdraw money from the fixed deposit account, before completion of the predetermined tenure. In case a customer wishes to withdraw his money, he will be required to break his fixed deposit which generally involves charge of a monetary penalty by the bank.

The interest rate attached to the fixed deposit may be paid to the customer at specified intervals (non-cumulative fixed deposit) or it may accrue to the fixed deposit account and paid to the customer only on redemption of the fixed deposit (cumulative fixed deposit). On completion of the tenure of the fixed deposit account, the amount deposited along with any accrued interest becomes payable to the customer.

Difference between savings and fixed deposit account:

The differences between savings and fixed deposit account have been detailed below:

1. Meaning

• Savings account is a personal bank account maintained by individual customers to deposit their personal savings and undertake their personal monetary transactions.
• Fixed deposit account is an account in which a customer deposits money for a specified fixed tenure and at a specified interest rate.

2. Opened by

• Savings bank account are primarily opened by individuals for undertaking their personal monetary transactions and depositing their personal savings.
• Fixed deposit account can be opened by individuals for their personal investment or by business entities for their business investments.

3. Purpose for maintaining

• Savings bank account are primarily maintained by customers for the safe-keeping of their savings and to make payments and collect receipts. Earning interest is a secondary purpose.
• The primary purpose of maintaining a fixed deposit account is to earn interest on the deposited money. Fixed deposit is thus a mode of investment for customers.

4. Liquidity

• Savings bank account offer high liquidity as the money deposited can be withdrawn almost instantly by its customers.
• Fixed deposit accounts have minimal liquidity as money cannot be withdrawn in the normal course. In case funds need to be withdrawn customers need to apply to the bank to break the fixed deposit.

5. Penalty on withdrawal

• There is no penalty on withdrawals from savings bank account. This is provided the required minimum balance is maintained.
• Banks levy penalty in case fixed deposit account is broken and the money is withdrawn prematurely.

6. Transactions

• A savings bank account may see frequent, often daily transactions of deposits (receipts) and withdrawals (payments).
• Fixed deposit account generally has only one deposit transaction at the start of the fixed deposit and one withdrawal transaction at the time of redemption.Fixed deposit account cannot be used for making any payments.

7. Proof of deposit

• Banks provide passbooks as a summary of transactions to the holders of savings account. This also serves as a proof of the amount held by the customers in their savings bank accounts.
• In the case of fixed deposit account, banks issue an acknowledgement in the form of a fixed deposit receipt as a proof of deposit to its customers.

8. Quantum of interest

• Savings account earn a low amount of interest as they offer high liquidity.
• Fixed deposit accounts offer higher rate of interest than savings account as the money is practically locked in. Higher the tenure higher the rate of interest.

Fixed Deposit Accounting

9. Variability of interest rate

• Savings account interest rate can be varied by the bank when there is a change in the federal interest rate.
• Fixed deposit interest rate cannot be changed by the bank once the customer has deposited the money in the account.

Fixed Deposit Account Calculator

10. Tenure

• Savings account have no fixed tenure and can remain operational or an indefinite period.
• Fixed deposit account is opened for a fixed and specific time period.

Fixed Deposit Account Usa

Conclusion – savings account vs fixed deposit account:

Fixed Deposit Account Details

Most individuals have savings bank account as digitized payments today mandate the need for a bank account to undertake monetary transactions. On the other hand, not every individual or every business has a fixed deposit account. A fixed deposit account is an investment mode more than a simple bank account and is thus preferred when the individual/business has spare funds to invest on which they wish to earn interest rate higher than that applicable to savings account.

Fixed Deposit Account Meaning