Fixed deposits - how to open one

If you are planning to put your money in a bank then Fixed Deposits (FDs) are the most popular saving instruments. FDs allow you to invest a certain sum of money for a certain period  and offers attractive returns on your investment at the end of the tenure.

Most people find it safer to keep their savings in the bank rather than investing in market-linked instruments. Moreover, opening a fixed deposit account in a bank is very easy and takes very less time. You can open the account through offline or online mode, whichever is convenient for you.

Follow the steps while opening an FD account:

Offline procedure

·         Visit your bank branch with which you want to open your fixed deposit account.

·         Fill up the application form to open your account. The bank will provide you with either Form 401 or Form 401A. The former is meant for individuals while the latter is for companies/firms/organisations.

·         Enter the details in the corresponding columns.

·         Attach the relevant documents like PAN card, Aadhaar card, any of the valid address proofs (utility bills, ration card, and others), your recent photograph, along with the application form and submit. 

Online procedure

The online procedure is easier and convenient:  

• Firstly, compare the interest rates of various banks and opt for the right one.
• Log in to the bank website.
• You will have to register and fill the necessary details. If you already have registered earlier, you can use your login ID and password to proceed.
• You can visit the page, which has detailed information regarding the opening of your fixed deposit account. Fill the application and upload your photograph before submitting the same.
•  You have to deposit a certain amount online to open the FD account, as per your convenience. You should store a minimum of INR 1,000.

Fixed deposits are accessible because of their risk-free nature and ease of management. Make sure you crosscheck the information and furnish the essential materials with the application form. Check for errors before the final submission.

5 facts to keep in mind before investing in high interest fixed deposits

A fixed deposit is a financial tool that allows you to invest or deposit your money for a pre-determined period. You get a higher rate of interest on the returns at the end of the tenure. Fixed deposits are the easiest and safest investment options if you wish to save up your hard-earned money for the future. However, before you make a move, the following are the 5 things that you must keep in mind:

·         Fixed rate

The interest rate on the returns depends on the amount you invest, the period, and the bank/financial institution you choose to invest in. The rate of interest on your fixed deposit tends to change over time. Once you invest your money, the interest rate on the fixed deposit is stagnant. You will have to pay the same interest for the chosen period. You can choose to pay the interest in regular intervals – on monthly/quarterly/half-yearly/annually basis – or you can pay them at the time of maturity.

·         Tenure

Banks that offer high interest fixed deposit allows you to credit the money as per your requirements. The investment period ranges from a minimum of 7 days to a maximum of 10 years, and the minimum amount of investment is as low as INR 1,000, the maximum being INR1.5 lakh.

·         Premature withdrawal

Although having a fixed deposit account is extremely beneficial when it comes to saving money and receiving high-interest returns, such an investment does not allow the investor to withdraw money before the maturity. If you ever need to take out cash from your fixed deposit account, you have to pay a nominal charge of 1 per cent on the current rate of interest as a penalty. In such an event, the investor will need to submit a letter requesting the premature withdrawal of money from the account.

·         Loan against Fixed Deposit

A credit against the existing fixed deposit is one among the various and quickest way to raise short-term debt. The different banks offer overdraft loan facility at different rates. The rate can be as high as 90 per cent of your fixed deposit value. Ideally, the tenure for which you are taking the loan should be the same as that of the fixed deposit and should not exceed the given term.

·         Tax savings on fixed deposits

To save your fixed deposit returns from tax deductions, you can invest in a tax-saving fixed deposit account. They come with a lock-in period of 5 years, before the completion of which you cannot withdraw any amount from the FD account. If you break your fixed deposit before the lock-in period, you will not be eligible for any tax benefits.

These are some of the critical facts, which you must consider before investing in high interest fixed deposits. Once you have understood what fixed deposit is all about, you can compare different banks to look for the best interest rates.

6 reasons why fixed deposits are the best way to save money

Even though investments are often portrayed as something that can be risky, fixed deposits are as safe as operating a savings account. Additionally, fixed deposit accounts help you grow your wealth, instead of just keeping your money safe. Following are some reasons why a fixed deposit is better than an ordinary savings account:

1. Your wealth increases

Even when you have accumulated a large amount of savings in your bank account, the interest earned on the same is minimal. However, if you put that savings to use and invest in an FD account, the considerable interest on the sum deposited will help your wealth grow over time.

2. Interest rates are high

In a savings account, the money that you save earns you minimal interest. However, if you keep the same amount of money in a fixed deposit account, you tend to earn a lot more from your initial deposit. This is because FD account interest rates are substantially higher than ordinary savings account rates.

3. Meet your financial goals

If you keep money in a savings account, the money remains stagnant. However, in the case of a fixed deposit, your money accrues interest. If you are saving money to purchase a new car or some other product, a fixed deposit account will help you reach your target sooner as opposed to a savings account.

4. Senior citizen benefits

If you are above 60 years old, you are liable to receive additional interest on the deposit. As per the norm, senior citizens receive 0.5 per cent more interest than the prescribed rate. If you have substantial deposits in your fixed deposits, this additional half percentage will mean a large sum of money.

5. Easy access to credit cards

Fixed deposit accounts allow you to link a credit card to the account as well. Additionally, companies charge less for credit cards that are connected with fixed deposits.

6. Taking a loan with the FD as collateral

If you want to build your credit rating, you can take a loan against your fixed deposit. In such a case, you would not need to provide any other collateral for this loan.  

Therefore, the next time you think about opening an account in the bank, go for a fixed deposit account.

4 best-fixed deposit interest rates in 2018

A fixed deposit is an investment tool you can use to grow and consolidate your savings. There is zero volatility when it comes to FDs, unlike other investment avenues such as equity and mutual funds. However, the interest you earn varies from bank to bank. These rates may also change over time, which is why you should keep an eye on the new prices and invest accordingly. 

Following are 4 of the best- FD plans in India 2018:

Note: The below-stated figures are subject to change.

1. Axis Bank

Axis bank’s fixed deposit accounts offer an interest rate between 3.50 per cent and 6.90 per cent* per annum for a tenure of 7 days to 10 years. They also allow a seamless transfer of funds from a savings account to fixed account to earn higher interest. You can open their account either through net banking or mobile sitting at home or office.

2. Bank of Baroda 

The bank with the second largest asset in India, Bank of Baroda, operates more than INR 3 trillion in assets. They offer competitive interest rates and convenient withdrawal options. Their tenure for fixed deposit is around 7 to 10 years. They, too, offer many deposit plans that you can choose depending on the term, nature of the deposit, and withdrawal features. The additional benefits that you can enjoy through their fixed deposit accounts are overdraft facility, outstation cheque collections, safe deposit lockers, ATMs, etc.

3. Bank of India (BOI)

A commercial bank headquartered in Mumbai, Bank of India operates more than 5000 branches in India, making it a part of the top 5 nationalised banks in the country. The fixed deposit interest rate of BOI is attractive as well. Also, they have an array of options to choose from regarding fixed deposit accounts.

4. Canara Bank

Canara Bank operates more than 6500 branches across the country. The fixed deposit rates offered by Canara Bank are attractive, making it come under the top 4 list.

 
If you are looking to start a fixed deposit account, ensure that you do so in one of the banks listed above.