Difference Between a Fixed Deposit and a Recurring Deposit?
- 6 Days ago
Written by - Shriram
A fixed deposit (FD) and a recurring deposit (RD) are ideal investment instruments for people who want stable returns. The significant difference between these two investment options is that you must invest a lump sum amount to book an FD. For recurring deposits, regular payments have to be made.
The fixed and recurring deposits are very similar but can be differentiated by how money is invested. High-interest rates and a tax-saving facility are some of the best benefits of an FD. A recurring deposit is best for those who prefer to invest small amounts.
A Shriram FD can get high-interest rates and additional benefits for senior citizens. You can earn interest up to 8.40% per annum, which includes an extra 0.50% for senior citizens. In addition, you can also avail of 0.25% interest on all renewals of your fixed deposit that has matured.
Given the similarity of deposits, people tend to get confused over which option they should choose. To know the differences and decide which is better, let's explore the features and differences of a fixed deposit vs a recurring deposit.
What is a Fixed Deposit?
A fixed deposit is an investment tool that lets you grow your finances over time with a predetermined interest rate. You must make a one-time investment at the start of the tenure in a fixed deposit. Typically, the term of an FD ranges between 7 days to 10 years. After the maturity of the deposit, you will receive the interest accumulated on the FD and the principal amount in your linked savings account.
Features and Benefits of a Fixed Deposit
- Assured Returns:
- Easy Process:
- Interest Rate:
- Multiple accounts:
What is a Recurring Deposit?
A recurring deposit is a type of term deposit in which you have the flexibility to invest a fixed amount every month and maximise your savings by earning interest on the amount. The interest rate applicable on an RD's investment amount is the same as FD's. A recurring deposit also has a tenure that usually ranges from 6 months to 10 years. The interest rates remain fixed till the term is completed. You can choose to receive the interest at regular intervals until the maturity day.
Features and Benefits of a Recurring Deposit
- Minimum Investment:
- Interest Rates:
- Flexible Frequency:
Key Differences Between a Fixed Deposit and a Recurring Deposit
|Features||Fixed Deposit||Recurring Deposit|
|Deposit Frequency||One time deposit||Monthly, quarterly, semi-yearly, and yearly deposits|
|Tenure Period||Seven days to 10 years||Six months to 10 years|
|Minimum Investment Amount||Approximately Rs. 1000||Approximately Rs. 10|
|Tax Benefits||Income tax benefits on a five-year fixed deposit||Not Applicable|
|Who is it best for?||Investors with lump sum savings||Individuals with small amounts of money|
|Interest Payouts||Periodic payouts or at maturity||Only on maturity|
Although a fixed deposit and a recurring deposit may be similar, they each have features that could benefit you depending on your saving goals. An RD is an easy investment option as you can deposit small amounts over time. An FD has more flexibility in terms of interest payouts, and also, you can save taxes with a five-year deposit.
Invest in a Shriram FD today to save your hard-earned money and earn an interest amount that will help you achieve your financial goals. With a Shriram non-cumulative deposit, you can make a steady income from the interest on your FD.
- Which is better, RD or FD?
- How can I convert RD to FD?
- What are the advantages of a fixed deposit?
- A fixed deposit and recurring deposit have similar features but are different as in an FD, you have to invest a single time, and in an RD, you have to deposit a small amount every month.
- A fixed deposit offers high-interest rates than a savings account and tax-saving benefits.
- You can enjoy regular interest payouts in a non-cumulative fixed deposit.
- A recurring deposit is best for individuals who prefer to invest small amounts.