Fixed Deposit is one of the most popular investment vehicles in India. It pays higher interest rates than savings accounts, and comes with low risks and guaranteed returns. This is why traditionally most people choose to park their savings in FDs.
If you are planning on investing your savings in a Fixed Deposit scheme, it is important that you take a look at the factors that effect on the FD interest rates. This will help you do a Fixed Deposit interest rates comparison between different banks, so that you can narrow down on the one that gives you the highest returns.
Factors & Schemes that affect Fixed Deposit Rates
Here is a look at some of the factors and schemes that have an effect on Fixed Deposit rates:
Perhaps the most common mistake that people make when getting a FD is to not look at the current rate of inflation.
Always remember that inflation is inversely proportional to the Fixed Deposit interest rate. So if inflation is on the rise, you will get less interest. Since you also pay a tax on your FD returns, you must calculate the total earnings you will make from the deposit, and then subtract the inflation and taxes. This will give you the real value of your FD returns.
About 18 months ago, the interest rate on FD was about 9%. This has fallen to about 7.5% in recent times. This is because inflation has increased. Therefore, before making an investment, study the current economic environment. For instance, delaying your FD a few months can get you better returns, as there may be a possibility of a dip in the inflation rate.
Special Schemes for Minors
If you are hoping to save to secure your child’s future, getting a Fixed Deposit for them is a great idea. FDs for minors require a parent or guardian to invest the money on behalf of the minor, and be in charge of the account till they turn 18.
So why would you choose this over a regular FD? Banks often offer special schemes for children, particularly the girl child. Usually the interest rates offered are higher than normal FDs. Making a one-time investment in such a financial instrument can help secure your child’s college education.
So start as soon as possible, so that you can give your child a brighten and secure future.
Higher FD Interest Rates for Senior Citizens
If you are over 60, you can opt for a Fixed Deposit designed specifically for senior citizens. Senior citizens usually get higher Fixed Deposit rates in India than others, thereby ensuring that your earnings are higher when compared to a regular FD. You also have the option to withdraw the interest generated on a monthly basis.
This gives you a constant source of income every month, much like a salary. Furthermore, you are also eligible for tax deductions under section 80C of the IT Act.
For youngsters who can’t avail this scheme themselves, as they are below the age of 60, they should tell their parents about this investment scheme. Fixed Deposits not only provide financial benefits, but also give peace of mind.
As you can see, there are different factors that influence the rate of interest for a Fixed Deposit. It may be inflation, age, taxes etc. When you plan to invest your savings, always remember that it is of uttermost importance to scout around different banks and financial institutions to learn about their interest rates, schemes, and more. This will help you figure out which organization gives you the best returns. You can then invest your hard-earned money here, and be assured that your investment is in safe hands.