A fixed deposit usually gives around 5% interest. Senior citizens get an additional benefit of 0.5%. However, that isn’t a considerable difference. Though fixed deposits are the safest savings, low-interest rates often disappoint people. Moreover, Best FD Rates interest rates saw a significant drop in recent times due to the ongoing market scenario.
The fact that these drops can happen in the long run is concerning. However, some ways can help gain more than 6% interest from your FDs so that you gain more profit out of them.
Do Your Bit of Research
You need to do some research before investing in an FD. Though the interest rates aren’t reasonable, there might be some banks and financers offering better interests. The interests and returns also vary based on the deposit amount and its tenure. These interests are usually calculated for every quarter, six months, a year, or at maturity. Calculate the returns from different choices using online calculators and proceed with the one offering more than all the others.
Understand the Interest Calculation
As it is already mentioned, banks calculate interests in four ways – quarterly, half-yearly, annually, or at maturity. This is a crucial way to determine the returns from FD. The returns are higher when the interests are calculated more often. In that case, quarterly calculations fetch more than the others. Prefer the banks offering these benefits as the effective net returns are always more from frequent interest calculations.
Try Cumulative Deposits
In cumulative deposits, interest is counted using the compounding formula. Hence, the interest accumulated in a particular period gets reinvested and earns interest along with the principal amount. Cumulative deposits’ compound interests fetch higher returns when compared to the traditional ones. The returns from simple interest are always less than that from compound interest. So, try the cumulative deposits if you’re looking for more benefits. Ensure the other aspects like liquidity, security, etc., before choosing any fixed deposit.
Apply for Online Fixed Deposits
Online fixed deposits offer better interest rates than their counterparts. For example, Mahindra Finance gives FDs at 9% interest online while offline interest is around 8%. Earlier, online facilities weren’t so prevalent and banks were also far from people’s residences. However, that isn’t the case now. Internet banking facilities are used more than personally visiting the banks. So, you don’t have to worry about the availability and connectivity issues while checking the online fixed deposits.
Split the Deposits
You must be aware of the TDS deductions on the fixed deposits. If the interest from your FD is more than ten thousand, you’ll be charged with nearly 10 per cent TDS. A wise way to avoid this is to split the fixed deposits. For example, if your amount will fetch you more than Rs. 10 thousand as interest, split the amount into shares. Open an FD for each share either with different banks or different branches of the same bank. Remember that the main motto here is – your interest from a single deposit shouldn’t be INR 10,000.
Diversify Investment Portfolio
Potential investors prefer mutual funds more than FDs as they are profitable. However, if you don’t want to risk your whole money, you can play with the interest. Say you have some X amount that gives a Y amount as interest. Let them be credited into your account and leave the X as it is. Invest Y in equity or shares using the SIP route. If you check the net returns, they are considerably higher than those from FDs alone. The advantage of this diversification is that the principal is entirely safe. So, this is an excellent bargain for people searching for ways to earn better.
Try to Avoid Breaking the FDs
No one wants to break their deposits mid-way unless there is no other choice. Doing so would lead you to lose the net returns and you’ll be charged with penalties as well. However, there are ways to prevent breaking a fixed deposit mid-way. Avail of the overdraft facility if you can. This way, your Fixed Deposit stays intact, the interest compounds, and yet your purpose is served. Another way to gain more is to split the FDs. Instead of breaking the FD with a lump sum and losing all the benefits, you can divide the amount into multiple FDs. Thus, you can break one FD during an emergency and the rest of your FDs stays intact.
FDs are the safest way to create savings. Make the best use of them to secure your future while gaining more returns than the traditional ones by following these methods.