Fixed deposits are a safe and attractive investment option

Fixed deposits have long been a safe and secure way of investing savings. The increase in the number of banks and people using banking services has led to more and more people opting for fixed deposits. With increasing inflation and major fluctuations in stock prices FDs have become a safe haven for risk-averse investors to park their funds.

Most private banks now offer their customers the added benefit of being able to create a fixed deposit online. With just a few clicks customers can create an FD and never have to visit a branch. The recent hike in FD interest rates has made them an attractive investment option.

Investors can raise funds against FDs without having to break these by taking an overdraft, so that the FD continues to earn interest for the investor. The interest on the overdraft is payable only to the extent that the facility is used and for the period it is used, not for the entire sanctioned limit. Overdraft facilities are usually given at rates slightly higher than those earned on fixed deposits. Since the overdraft is secured by the deposit, the rates are favorable. An overdraft against an FD can be foreclosed without any penal charges and there is no fixed tenure for the repayment of the overdraft.

The tenure of deposit scheme requires careful consideration, if you are sure that you will not require those funds for a certain period of time only then invest in this scheme as most of the banks have started to levy a penalty on the premature withdrawal of fixed deposits.

Banks also offer superior rate of returns on FDs held by senior citizens. Across the board, Senior citizens receive about 0.5% more than the normal rate of interest on FDs.

Investors should also be aware of a few features associated with investment schemes like FDs. A term deposit scheme requires the investor to be patient as the longer the tenure, the larger are the returns earned by the investors on their deposits, also there are various other facilities like stocks, mutual funds that can yield comparatively higher returns in a relatively shorter period of time. However the assurance of an FD is what scores over these other avenues of investments. FDs are subject to tax deductions as the interest that the investor earns comes under the taxable category and TDS is deducted from the total interest earned by the investor. In the current scenario it is not advisable to go for a premature withdrawal of your FD as banks have begun levying a penalty on this. It’s better to seek an overdraft. Some banks even offer a credit card that is linked to the value of the FD. These options can be considered instead of breaking an FD.