How Much Interest do Banks Give on Fixed Deposits?

Fixed deposits could possibly be your choice of investments. But, why would it be a choice of investment, are you thinking? There are several reasons why someone should and would choose to invest in an FD. This answer is going to be a four-parter. a) When you do not want to indulge in any kind of risks. b) When you are in it for the long term. c) When you are a senior citizen (you have added perks of increased interest rates). d) When you want to enjoy some tax benefits. Do you think an FD is your kind of investment? If you are, you are at the right place. Here let’s look at everything about an FD – especially the interest rates.

What is a Fixed Deposit, and How Does it Work?

A fixed deposit, or ‘FD,’ is a type of bank account that pays a set rate of interest to the investor. For a set amount of time, the investor commits not to withdraw or access their cash.

Interest is only paid at the conclusion of the investment period in a fixed deposit. You can readily determine the interest you will earn at the end of any fixed deposit investment because the investment term and interest rate are both fixed.

You can choose a tenure (sometimes known as a ‘term’) when you start a fixed deposit account. When you choose a tenure, you are electing to put your money away for a length of time and not touch it (one month, three months, six months, one year, etc.). The length of these contracts might range from 7 days to 10 years.

Now, do you want to look at the rates of interest a bank would offer you? These interest rates that we are going to talk about are time-sensitive. This means that they can change after 2022. This applies to every bank – whether you are looking at the current rate of interest on fixed deposits in Canara Bank, HDFC, Axis, or any other for that matter.

Interest Rates of Fixed Deposits from Different Bank

Here is a long list of interest rates; this will give you an idea of how much you would be making in return for your lumpsum investment:

1. State Bank of India Fixed Deposit: 2.90% – 6.30%
2. IDBI Bank Fixed Deposit: 2.70% – 6.35%
3. Canara Bank Fixed Deposit: 2.90% – 6.25%
4. Bank of Baroda Fixed Deposit: 2.80% – 6.35%
5. Bank of India Fixed Deposit: 2.85% – 5.95%
6. HDFC Bank Fixed Deposit: 2.50% – 6.35%
7. Punjab National Bank Fixed Deposit: 3.00% – 5.75%
8. Axis Bank Fixed Deposit: 2.50% – 6.50%
9. IDFC Bank Fixed Deposit: 2.50% – 6.75%
10. Punjab and Sind Bank Fixed Deposit: 3.00% – 5.90%

Isn’t this some good investment – your money is working for you more than you worked for it!

But does this mean you cannot withdraw your money in any situation?

Withdrawing the Funds Before the Maturity

If you take money out of a fixed deposit before the term finishes, you may lose some or all of your interest.

So, before you put a substantial chunk of money into a fixed deposit, think about whether you will need this money in the near future and adjust your tenures accordingly. A premature withdrawal could result in a loss of thousands of gains in interest earnings. Some people get around this by making multiple fixed deposits of varying maturities.

What are the Types of FDs?

There would be different types of FDs if you didn’t know. You can always make a choice based on your financial goal.

1) The Short Term FDs: Have some spare cash but won’t need it for another month or two? Consider making a short-term fixed deposit with your money. The interest you’ll receive won’t be spectacular, but it’ll be better than nothing.

2) The Long Term FDs: Consider putting your funds in a long-term fixed deposit if you won’t need access to them anytime soon. Some banks provide up to ten-year terms. In general – the longer your loan tenure, the better your interest rate.

3) Foreign Currency FDs: You can save in foreign currencies with these fixed deposit accounts. If you need to secure your savings against currency rate swings, this is useful.

4) Junior FDs: Do you want your child to start saving money? While traditional fixed deposits normally require applicants to be 18 or older, institutions that offer junior fixed deposits allow younger individuals to open accounts.

5) Senior FDs: Are you a retiree looking for ways to protect your savings? Consider a fixed deposit designed specifically for senior adults. Some fixed deposits allow you to withdraw money early without losing income.

What are the Major Distinctions Between a Fixed Deposit Account and a Savings Account?

A fixed deposit account is comparable to a savings account in that both are low-risk ways to grow your money.

The interest rates are given, however, are a significant difference between the two. Fixed deposit accounts typically pay interest rates of 1.4% to 3% per year. Savings accounts, on the other hand, typically pay 0.2% to 1.5% each year in interest.

Some savings accounts give interest rates that are comparable to (or higher than) those offered by fixed deposit accounts, but you may be required to deposit a large sum of money, pay a certain number of bills with your account, or spend a minimum amount with your linked credit/debit card each month.

Conclusion

You will have to choose the right kind of fixed deposit for you before you can start investing. Now, you will have to know that different sources will give you different rates of interest – you can make big-time returns when you choose the right FD.