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FD vs Savings Account – Why should you choose to invest in FD?


FD vs Savings Account – Why should you choose to invest in FD?
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 For decades, investors have protected their wealth through savings instruments like a fixed deposit. Even today, fixed deposit schemes continue to play a vital role, with investors parking their corpus in their FD accounts. In early 2020, the IMF projected the global economy to contract by 3 per cent. It was also announced last month that the Indian economy officially entered into the recession, with the country’s GDP during the second quarter of 2020 contracting by 7.5 per cent.

How can investors seek refuge during trying times?

Investors are seeking refuge in their savings instruments: the most basic of which are fixed deposits and savings accounts. A savings account is perhaps the most widely available type of bank account in India, making up nearly 33 per cent of the country’s total deposits in 2019, as revealed by RBI. Like a wallet, a savings account gives you the facility to withdraw or deposit money at your convenience. You receive interest on your deposit, making it among the safest ways to grow your money, along with providing ease of withdrawal. The account holder can deposit and withdraw amounts without any restrictions and can do so as per their need.

A fixed deposit or FD has traditionally been a one-time investment, wherein the money deposited for a set timeframe would earn interest from the bank or financial institution it has been deposited under. In 2019, FD schemes made up 57.7 per cent of the country’s total deposits, according to data published by RBI. Due to repeated repo rate cuts recently, returns on FD have gone down but you can still benefit from attractive FD interest rates offered by Bajaj Finance FD.

Unlike a savings account, one cannot withdraw the money in a traditional fixed deposit before the deposit matures. However, Bajaj Finance FD scheme comes with a lock-in period of only 3 months, and you can consider availing a Loan against FD to fund emergencies. In traditional banks, breaking or withdrawing a fixed deposit before it has wholly matured can also result in a penalty, which is borne by the account holder.

FDs vs. Savings Accounts: Where should you invest?

Beyond their primary functions, how do fixed deposit schemes and savings accounts differ? A fixed deposit can offer a variety of benefits that a savings account cannot. We take a look at advantages offered by Bajaj Finance FD, in comparison to a traditional savings account.

1. Attractive Returns with Bajaj Finance FD

Both savings accounts and fixed deposit schemes offer interest on one’s investments. The bank or financial institution gives a fixed rate of interest on the total amount deposited each year. The difference between an FD scheme and a savings account is that the former tends to offer higher FD interest rates. FD Rates in India can be quite attractive even with short-term deposits. Hence, one of the benefits of FD schemes over savings accounts is that you can grow your deposit more with an FD investment. For instance, with a Bajaj Finance online FD, you can get interest up to 6.85 per cent (among the highest fixed deposit rates), while savings accounts tend to offer interest rates around 4 per cent to 5.5 per cent.

Let’s compare the returns offered by Bajaj Finance FD with traditional banks and other NBFCs, by assuming you’ve invested an amount of Rs. 20,00,000 for 36 months.

Fixed deposit 

Amount invested 

 Rate of Interest 

Investment Tenor

Interest  Earned

Bajaj Finance (Regular Offline)

20,00,000

6.6%

36 months

₹4,22,711

Bajaj Finance (Regular Online)

₹20,00,000

6.7%

36 months

₹4,29,536

Bajaj Finance (Senior Citizens)

₹20,00,000

6.85%

36 months

₹4,39,796

Traditional banks

₹20,00,000

4.9%

36 months

₹3,14,640

Other NBFCs

₹20,00,000

6%

36 months

₹3,91,236

Note: ROI in the above calculator may vary up to 4 bps with the actual rates offered

2. Tailored for Senior Citizens

Savings accounts tend to preserve their uniformity for almost all their users. This means they are likely to keep the interest rates the same even for a retired senior citizen. On the other financial institutions increase their interest rate by anywhere between 0.10 per cent to 0.25 per cent per annum for those over the age of 60. Bajaj Finance FD offers an additional rate benefit of 0.25 per cent for senior citizens, which can be a great way to support the financial needs of those in their retirement years.


3. Monthly savings with Systematic Deposit Plan 

Making monthly investments can be very tedious if you take a manual approach. However, this is an excellent way to budget one’s investments periodically, and gradually grow one’s wealth. Bajaj Finance Limited offers this unique facility in the form of a Systematic Deposit Plan (or SDP) wherein you can get started with disciplined savings starting INR 5000 per month. You can also choose to carry out your monthly deposit from a range of 6 to 48 times, over flexible tenures ranging from 12 to 60 months. This type of facility is not available for savings accounts.

4. Flexible Tenures

There is no need to think of tenure with a savings account, as one’s investments are always accessible without having to mature. With fixed deposit schemes, the concept of investment term comes in. Almost all FD schemes in India allow you to choose your preferred tenure, ranging from anywhere between 12 months to 60 months.

One can use the tenure to their advantage. By laddering one’s fixed deposit investments and keeping funds inaccessible until the term is complete, they can enjoy higher returns while managing their need for liquidity. This opportunity to improve cash flow with liquidity is seldom available with a savings account. You can also use the Bajaj Finance FD Calculator to enter a few basic details and determine how your savings will grow, as per the choice of your investment.

The bottom line

Both savings accounts and fixed deposit schemes are essential investment tools available to anybody regardless of their income status. Bajaj Finance online FD schemes offer unique advantages like flexible tenures, a systematic investment facility, and attractive interest rates, making them the preferred option for those looking to maximize their investment returns.

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