RD and FD

These days, the secret to investing your money is to keep a handful percentage of it aside and let it grow. Here comes the concept of simple interest and compound interest. You must keep your financial base so strong that you have a secured future, in terms of finance and monetary help. On today’s date, one should know how to plan their expenses and make a strong foundation base.

These days, people are very much into investment as the steady and fast growth, worldwide, has taken place and this won’t slow down. People want to keep themselves updated and don’t want to miss out on anything in today’s world. The stock market is on a go but then, the older versions of investment haven’t been out of style. Though the interest rates have gone down in the year 2019, still banks offer good and average interest rates on term deposits like FD and RD. 

FD and RD

Fixed deposits (FD) and recurring deposits (RD) are the two most famous term deposit schemes offered by banks these days. One major benefit of investing in fixed deposits and recurring deposits is that these both are risk-free investment options and can be done with any minimum amount allowed by the bank you are referring to.

Features Of Fixed Deposits

The following are the features of fixed deposits:

•         Safe investment
•         Fixed rate of interest offered
•         Interest rates vary subject from time to time
•         Lump-sum return on maturity
•         Better interest rates for senior citizens
•         Salaried employees can invest and receive fixed returns
•         Safe and certified

Features Of Recurring Deposits

The following are the features of recurring deposits:

•         Safe and secure investment scheme
•         RD means, you can deposit smaller amounts from time to time, each month
•         One of the most sought investment plans
•         Earn fixed returns
•         Has a predetermined tenure
•         Total amount received at the end

Difference between and Similarities between RD and FD

Differences (FD vs RD)

•         If you want to invest a fixed and certain amount of money, you can go for a Fixed deposit.
•      It gives a fixed rate of interest at the time of investment which is decided by the specific bank. You receive the lump sum altogether at the end of the maturity period.
•         Whereas, in a recurring deposit, you can invest small amounts every month to receive a fixed return as per your choice.
•         The tenure for a fixed deposit is a minimum of 7 days and a maximum of 10 years, whatsoever you want to choose. For a recurring deposit, the tenure ranges from 6 months to 10 years.
•         The minimum investment amount for a fixed deposit is 10 thousand and for a recurring deposit, the minimum amount every month is 2000.
•         The safety criteria of the banks are very secure as you pay the lump sum amount at the start of the investment.
•         Whereas, when you default a recurring deposit, you have to pay a penalty amount which will be asked.

Similarities (FD and RD)

•         Both fixed deposit and recurring deposit has a safe and secure investment plan
•         They offer guaranteed returns when you reach your maturity period.
•         The interest rate is fixed at the time of the investment of your money.
•         Both fixed deposit and recurring deposit can be opened through any bank at any place at any time with any specific amount of money asked in the scheme of the bank subject to fixed and recurring deposit which is offered.
•        The minimum amount may vary but the tenure can be kept as long as you want to keep in mind the minimum asked.
•         In both fixed deposit and recurring deposits, you can withdraw your money in your premature tenure period but with the minimum penalty cost asked by the bank. In a fixed deposit, your interest rates get lowered, and similarly, in a recurring deposit, you are asked to pay a minimum penalty rate.

What should you Choose ? 

There is a constant debate about FD vs RD about which is better.

Instead of debating on what is better- a fixed deposit or a recurring deposit, you must focus on what fits your need in the space at that point in time. Both, fixed deposits and recurring deposits are one of the safest ways of investing your money, but in this case, you need to figure out what needs you need to fulfil for the time being.

If you have a big amount and you need to fix it for a specific and ensured return at the time of maturity. You also get the option of reinvesting your money after you have reached the maturity period.

If you have a small amount of money and you want to deposit it constantly every month, you can anytime go for a recurring deposit option in any bank. It’s just that you need to repay the whole amount otherwise you will be charged a penalty. 

Conclusion

Both fixed deposits and recurring deposits are the best options for investment but it all depends on your choice and the potential of your earnings. Most people get confused when choosing between FD and RD when they are not aware of the difference between them both. If you are looking for one of the safest options, you must go for Fixed Deposits or Recurring Deposits.