Which is Better: Fixed Deposits v/s Savings Accounts v/s RD Accounts

Fixed Deposit, Recurring Deposit and Savings account are some of the safest investment options for an individual. However, you must understand them in-depth to pick the one that will best suit your needs. Let’s look at each one of them in detail.

#Fixed Deposit

In case of a fixed deposit, the return on your investment is guaranteed. Fixed deposit interest rates are the highest among FD, RD and SA. Following are some key points that you should remember:

1. You can open multiple FD accounts in the same bank or in different banks and NBFCs. 
2. You can deposit your investment amount through cheque or draft.
3. FD accounts can be opened for both minor and adult. 
4. You can also open the account for the minor, and it will be converted on their name after they become an adult. 
5. You can also open joint FD accounts. 
6. The tenure you choose at the start will be fixed, and there are restrictions on withdrawal.
7. After a certain period, the facility to avail loan against your FD will become active.
8. In case you opt for premature withdrawal or choose to break your FD, then your return will be calculated on a lower interest rate as a penalty for premature withdrawal.
9. Post offices also provide a fixed deposit facility. 

#Savings Account

A savings account is a regular bank account opened by an individual in the bank. This account is primarily used as a safe place to keep your income and use it whenever you want. Some key points that you should know about savings account are:

1. You can deposit money in any form, cash, cheque, bank transfer, etc. 
2. The account holder can use an ATM to withdraw money.
3. Only one account per person is allowed with a bank.
4. The facility of a joint savings account is also available. 
5. In some savings account, the minimum balance maintenance requirement is also there. 
6. Withdrawals can be made through any mode any time, subject to the balance available in the account. 
7. The accounts of minors are converted to their name when they become adults.  
8. Interest earned is tax-free up to a maximum of Rs. 10,000 per annum. 

#Recurring Deposit

Recurring deposit is much like a fixed deposit with a few relaxations as in, that instead of making a lump sum investment, you can regularly invest in small amounts. Some notable points about RD are:

1. It is a great instrument to build the habit of saving money. 
2. The minimum can be as low as Rs. 100 for starting a recurring deposit. However, it varies from bank to bank. 
3. Even post offices provide the facility of opening a recurring deposit account. 
4. The interest rate of RD is slightly lower than that of fixed deposit but higher than the savings account.
5. You cannot withdraw money during the tenure. However, you can opt for breaking your deposit in which case a certain penalty will be applicable.
6. The minimum tenure for RD is 6 months, and the maximum tenure can go up to 10 years. 
7. After a certain period has lapsed, the facility to avail loan against your deposit becomes available. 

If you are looking for a safe investment option and have a decent amount of money, then you can opt for a fixed deposit. The savings account is not naturally an investment option, and it should be used to keep your income in the bank and make regular transactions. Lastly, if you are struggling with saving money or do not have a lump sum investment amount, then opt for Recurring deposit.