Fixed Deposit vs. Recurring Deposit – Which is a Better Option?

Fixed deposits and Recurring deposits are considered as the safest modes of investments in India. The main advantage of investing into these schemes lies in their guaranteed returns over the selected period of time. Furthermore, the attractive rates of interest make them even more likable.  However, investors do get confused about whether to put their money in Fixed Deposit vs. Term deposit or Recurring Deposit. Both FD are RD are types of term deposit. Let us figure out in detail a comparative study to see which one is a better investment option. 

What Are The Differences Between FD And RD?

FDs and RDs both are good financial tools and offer fixed returns. The differences between these two are given below-

  • Manner of investment– In FDs a lump sum of money is defined for a fixed period of time, while in RD a fixed amount is invested every month for the tenor you have selected. This is useful if you wish to keep saving and investing on a monthly basis.
  • Tenor– The period of investment in FD ranges from 7 days to 10 years, while the period of investment in RD ranges from 6 months to 10 years. 
  • Interest amount – Investing in FD gives you the ease of getting the interest payout as per your convenience. All the banks offer the facility of monthly, quarterly or half yearly or annual payments. RDs usually act like a bank account where you are depositing a fixed sum of money and the interest payout is available only at the maturity date.
  • Renewal option- FDs generally come with a renewal option wherein you can carry on your investment further and fix it for more number of years. However, there is no such option available with RDs. If you wish to invest your money further after maturity, you need to start a new RD account.

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What Are The Similarities Among FD And RD?

  • Both FDs and RDs are fixed income investments and offer the assured sum of money. 
  • The interest rates at which you have fixed your money remains the same throughout the term. Once invested, the market fluctuations do not have any impact on the returns of the FD and the RDs. 
  • The taxation rules are also the same for both of them. If the interest amount exceeds Rs. 40,000 a year, banks also deduct TDS. For senior citizens, the TDS is deducted over Rs. 50,000 a year.

FD vs. RD: Which Is A Better Choice?

Both the investment schemes sound great as they have multiple useful features. Fixed deposit calculator monthly interest tool is available online that help you to calculate your maturity amount and give a comparative view of the various FD schemes.  

However, FDs are better income generators than RDs as they offer a good sum of money. This happens because the principal amount is larger in the beginning so the interest rate is applicable accordingly over the entire amount and yields a larger sum of money.

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 In RDs, the principal amount invested is a smaller amount and is deposited every month. So, for those people who do not wish to invest money in one go can opt for RDs but if you have a good principal amount and wish to save it, FD is the best option. 

Also, in an FD, you should go for the cumulative ones as the interest accrued is reinvested with the principal and this process therefore continues till the time of maturity, thereby generating good returns. Non-cumulative FDs offer interest amounts at fixed intervals and are good for pensioners.  So, be it FD or RD, always choose as per your investment goals and budget.

If you invest in a high-paying fixed deposit such as Bajaj Finance FD, you can earn up to 7.35% interest rate. This is much higher than the post office FD plan which currently offers highest interest rate up to 6.7%. 

You also have the flexibility to choose tenor options ranging from 12 months to 60 months, and the frequency of periodic interest payouts as monthly, quarterly, half yearly or yearly as per your requirement.  Moreover, Bajaj Finance FD also offers an additional interest rate benefit of 0.10% if you invest online. These deposits are rated stable by CRISIL and ICRA, which means the safety of your investment is guaranteed. You can calculate your returns in advance using an FD calculator monthly interest tool.