Fixed Deposits vs Recurring Deposits A Detailed Comparison

A fixed deposit is a type of investment where you invest a certain amount of money for a fixed tenure and interest rate. The tenor stretches from 7 days to 10 years, and the rate of interest ranges from 2.75% to 7%.

A recurring deposit allows you to invest a fixed amount regularly for a predetermined tenor. Here, the interest is earned every month but is credited at the time of maturity. However, you must note that the rate of interest remains constant throughout the tenor.

Differences Between Fixed Deposits and Recurring Deposits

Method of Saving

Fixed deposits are saving schemes where you invest in a one-time lump sum at a predetermined interest rate. On the other hand, in a recurring deposit, you can set aside a fixed amount every week, month or quarter.

Investment Amount

Another essential feature of fixed deposits vs recurring deposits is the investment amount. In a fixed deposit, the initial investment amount is usually higher, for most banks it’s Rs. 5,000. Whereas with a recurring deposit you can set aside comparatively smaller sums; for many banks it is as low as Rs. 500.

Withdrawal

You can partially withdraw from your fixed deposit, and the remaining amount will continue to earn interest.  You cannot partially withdraw from a recurring deposit. However, you can withdraw prematurely from either of the two.

How Does One Choose Between The Two?

An FD is a good option for those of you who are willing to invest a large sum of money in one go and for a longer time. If you have your eye on your favourite high-end laptop or a much-awaited short vacation, go for fixed deposits. The premature-withdrawal feature of an FD is a great way to raise funds in a contingency. So, if you need cash to pay for a medical emergency, look at your fixed deposit as a friend in need.  

An RD is a good option if you’re looking to get more from your monthly income. By investing comparatively smaller amounts at particular intervals, you can afford a few luxuries without leaving a dent in your budget. If you put aside, say Rs. 5,000 every month, you can use this amount for anything you’d want, or this can even help you in case your salary runs out towards the end of the month-end.

Conclusion

Both fixed and recurring deposits are attractive, low-risk investments to help you save; the choice is finally yours. Your final decision after considering all the common features and differences of fixed deposits vs recurring deposits will depend on the kind of financial requirements you have. You also need to consider how much you’re comfortable investing. Both go a long way to help you on a rainy day, but understanding your investment needs is sure to help you move ahead in a direction where you’ll eventually want to head to, so make the smart decision and start early.

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