Investors who want to set aside a fixed amount for the long term should consider Fixed Deposits (FDs). The amount that may be invested for a specific period is not limited. With FDs, the invested amount cannot be revoked until the end of the term. In addition, banks provide Flexi Deposits, a form of FDs, to investors looking for access to liquidity. These deposits combine the advantages of Savings Accounts and Fixed Deposits.
What is a Fixed Deposit?
One of the most popular financial products of financial institutions is the Fixed Deposit. It is safer than equity investments; therefore, it is a preferred type of investment. And before you invest any money, you already know the returns. Therefore, it is a secure investment to minimise your risk. Additionally, it can assist you in achieving your long-term financial goals. It includes retirement planning, home ownership, and paying for a child’s education.
Advantages of an FD
- A guaranteed rate of return: It is a crucial factor in why people invest their money in Fixed Deposits. You can count on getting the stated rate of return once you put money into an FD account.
- Flexible tenure: A Fixed Deposit’s term is negotiable and subject to the depositor. Although each bank has its minimum tenure requirements, the depositor has the final say.
- Easy liquidation: The process of liquidating a Fixed Deposit is not tricky. Online net banking can also be used to liquidate FDs booked online. If not, most bank branches have a form for liquidating FDs.
What is a Flexi Deposit?
Usually, it combines a Fixed Deposit with a Savings Account. It ensures that customers take advantage of Fixed Deposit accounts’ high-interest rates.
Advantages of a Flexi Deposit
- Flexi Deposit interest rates are higher than Savings Account interest rates. Consequently, you can be sure that your investment will yield a higher return.
- To participate in the Flexi Deposit programme, you must make a single lump sum payment. Any amount that you choose to invest is an option.
- To suit your unique needs, you can customise the duration of your investment. You can invest for as long or as little as you like to achieve your financial goals.
Comparing Flexi Deposit and Fixed Deposit
- Different purposes: The goals of the two saving plans differ. You can save money for an extended period—between three and twenty years with a Fixed Deposit. However, with a Flexi Deposit, you can select a time frame that is more convenient for you. It ranges from one month to 15 months or longer. In addition, you deposit a large amount in a fixed deposit with a longer term. In a Flexi Deposit, you put smaller amounts each month, which grow to a large amount upon maturity.
- Withdrawal abilities: You can take money out of your Flexi Fixed Deposit whenever necessary. Within 24 working hours, the funds will be credited to your account. In addition, if you withdraw money from a five-year Fixed Deposit before the term is up, you can no longer claim tax advantages on the specified amount.
- Tax advantages: FDs give tax advantages under Section 80C of IT act; Flexi Deposits do not.
- Interest rates vary: Flexi Fixed Deposit offer lower returns than longer-term fixed deposits. As a result, Flexi Fixed Deposit interest rates are lower than those on Fixed Deposits with longer terms.
- Duration: Long-term Fixed Deposits have a different course than Flexi Fixed Deposit, which have shorter durations. You may use the Flexible Deposit for a minimum of 7 days and a maximum of 2 years. The long-term fixed deposit also has terms ranging from 5 to 20 years. The duration is up to you to decide. The time frame for Flexi Deposits and Fixed Deposits differs significantly. The period of a Fixed Deposit does not give you any flexibility. The popularity of Flexi Fixed Deposit is due to their shorter and more flexible duration.
- Loan facility: Neither Flexi Fixed Deposit nor short-term Fixed Deposits are eligible for a loan. However, Fixed Deposits that are five years old or longer allow you to borrow money against the FD. Up to 90% of the Fixed Deposit amount may be borrowed. Flexi Fixed Deposits cannot be made at this position.
Conclusion
People are always eager to try new things that are both innovative and beneficial to them. Flexi Deposit is a good investment option. When you want to set aside a cash reserve, you can quickly withdraw in an emergency. But an FD provides you with flexibility and convenience because it is straightforward. Weigh your options and choose wisely.
