The money deposited in the bank is a saving, but if you get more return when the money is saved in other form, then I guess almost everyone would prefer it as it provides a little extra from the normal amount. Most investors have a dilemma of whether to invest money in fixed deposit or recurring deposit, choosing the right one can be tricky while both of them offer returns with the safety of money deposited, let’s check which one to adopt.
Fixed Deposit
Fixed deposit is a fixed investment in the bank, where banks pay you a fixed interest for a specified time or till it reaches maturity. The minimum amount invested for a fixed deposit is INR 10,000; once it reaches maturity you will get the invested amount as well as the accumulated interest. The interest can be claimed at monthly, half yearly, quarterly or yearly frequency as per your wish or upon maturity. Pre mature withdrawal is also applicable at certain conditions; the interest rate is usually higher attracting more depositors to invest money.
Recurring Deposit
Recurring Deposit is also for a fixed time period on dominant interest rate for a time period chosen by the customer. The customer has to pay fixed instalments for a tenure which will be decided upon opening the bank account, he will also be issued a passbook for the same. The depositor will receive the interest of the amount deposited at the time of maturity but he/she will also have to pay the penalty for the delay in making the deposit of instalments.
Fixed deposit and recurring deposit - Difference
In a fixed deposit, you initially invest a huge sum of money which will fetch you good interest over the year for the money invested.
In a recurring deposit, you earn interest for a period of 12 months for the first instalment, for the second instalment you earn interest for a period of 11 months and for the third instalment interest earned is for 10 months and so on.
Hence for this reason fixed deposit is always opted rather than recurring deposit as it fetches you a higher amount upon maturity and you only have to invest the money once and not at every month.
Depending on your money availability, you can make a good decision; if you have a huge amount of money to deposit/ invest in the bank making a fixed deposit is a wiser choice. If you do not have enough money to invest and earn a monthly income then making smaller deposits depending on how much money you have at regular intervals like that of recurring deposit will be able to fetch you a small saving and interest.
