Choosing the Right Term Deposit: Fixed, Recurring or Money Multiplier – Your Best Fit?

When it comes to secure and rewarding ways to grow your savings, term deposits are a popular choice. They offer a fixed interest rate and a predetermined maturity period, making them a low-risk investment option. However, not all term deposits are the same. There are various types to choose from, including Fixed Deposits, Recurring Deposits, Variable Recurring Deposits and Money Multiplier Deposits. All of us need help in navigating through the maze of options and guidance in selecting the right term deposit that aligns with our financial goals. Let’s discuss through it all!

What is Term Deposit?

Before we dive into the complexity of different types of term deposits, let’s establish what a term deposit is. A term deposit is a deposit account variant where you deposit a lump sum, monthly fixed or variable amount for a fixed period at a predetermined interest rate. At the end of the term, you receive the principal amount along with the interest earned. Now let’s see the different types of the term deposits banks offer for us to choose from:

Fixed Deposits (FDs)

Fixed Deposits, often referred to as FDs, are the most common type of term deposit. They offer a fixed interest rate for a specific tenure, which can range from a few weeks to several years. Here are some key points to consider:

• Fixed interest rate: FDs provide a stable interest rate throughout the entire term, ensuring you know exactly how much you’ll earn.
• Flexibility: FDs offer flexibility in choosing the tenure that suits your needs.
• Premature withdrawal/Preclosure Penalty: While FDs offer security, withdrawing funds prematurely might result in penalty and reduced interest earnings.
• One can open FD with an amount as minimum as Rs.1000 and there is no maximum amount.
• Interest Payment: Quarterly or Monthly as per customer choice.

Recurring Deposits (RDs)

Recurring Deposits  (RDs) are ideal for those who can’t make a lump sum deposit but want to save systematically over time. Here’s what you need to know:

• Monthly contributions: In RDs, you make regular monthly fixed deposits, and the interest is calculated on your total savings. One can make a minimum deposit of Rs.100 and can go as high, in multiples of Rs. 100, as possible as there is no maximum limit on the deposit.
• Earning potential: While RDs have lower minimum deposit requirements, the interest rates are typically lower than FDs.
• Interest Payment: Maturity or preclosure.

Variable Recurring Deposits (VRDs)

Now there may be some depositors who do not want to set a fixed amount for every regular interval so for them Variable Recurring Deposits  (VRDs) are ideal.

• VRD is a type of recurring deposit scheme which allows customer to save variable sums of money every month depending on their ability. It is quite convenient since the customer will not be required to open a new account for each deposit. One can start with an initial deposit of Rs. 500 or in multiples of Rs.100 upto a maximum of Rs. 1 Lakh. Interest payable is paid on maturity or preclosure.

Money Multiplier Deposits (MMDs)

Money Multiplier Deposits offer a unique way to grow your savings exponentially. Here’s how they work:

• Under this, one can place a fixed amount as deposit for a fixed period and the interest earned thereon is reinvested at quarterly rests to yield compound interest.
• Interest on interest: MMDs allow you to earn interest on both the principal and the interest you’ve already earned.
• Flexibility: MMDs offer more flexibility than FDs in terms of deposits and interest earned.
• Interest Payable is renewed with principal on maturity.

Choosing the Right Fit

Now that you’re familiar with the different types of term deposits, let’s discuss how to choose the right one for your financial goals:

1- Define your goal: Determine the purpose of your savings. Are you saving for a short-term goal, like a vacation, or a long-term objective, like retirement?

1. For short-term goals, such as a vacation or purchasing a consumer item, you might prefer the flexibility of a shorter-term Fixed Deposit (FD) or even a Money Multiplier Deposit (MMD) if you want to take advantage of potential higher returns.
2. For goals, like buying a car or renovating your home, which are more medium-term, a Fixed Deposit with a moderate tenure that aligns with your target timeline would be suitable.
3. Retirement or building substantial wealth which are long-term goals for anyone, these goals are often best supported by Fixed Deposits with longer tenures or Money Multiplier Deposits for their potential for compounding

2- Assess your risk tolerance: Consider your comfort level with risk. If you prefer stability and guaranteed returns, FDs might be your best fit. If you’re open to a bit more risk for higher returns, MMDs could be appealing.

3- Evaluate your financial discipline: Your ability to commit to regular savings can influence your choice of term deposit.

1. If you can commit to regular monthly savings, RDs might suit you. They are a great choice for those who want to build their savings systematically over time.
2. If you have a lump sum amount to deposit, FDs or MMDs might be more appropriate. These allow you to invest a larger sum of money upfront, which can be advantageous if you have a windfall or a significant savings goal.

4- Compare interest rates: Research and compare interest rates. A higher interest rate can significantly impact your earnings.

In the world of term deposits, there’s no one-size-fits-all solution. Choosing the right term deposit—be it Fixed Deposits, Recurring Deposits or Money Multiplier Deposits—depends on your financial goals, risk tolerance, discipline, and the interest rates available. Careful consideration of these factors will help you make an informed decision and find the best fit for your savings journey. Always remember that financial planning is a dynamic process, so it’s a good practice to revisit and adjust your choice as your circumstances evolve.

Want to know more about Indian Bank Term Deposits? Click here.

Some of the unique term deposit products offered by bank (not limited to) includes:

• IB Tax Saver Scheme
• Money Multiplier Deposits
• Variable Recurring Deposit
• Short Term Deposits
• IB Golden Ager– Term Deposit Product for Super Senior Citizens
• IND Non-Callable Deposit
• IND Super 400 Days
• IND Court
• Term Deposit with Premature Partial Withdrawal Facility “IND FLEXI FIX“
• IND Supreme 300 DAYS.

Now choosing the right term deposit is as easy as it can be. Every information is just a click away and one can access either from their mobile devices or from their desktops. Take the next step: Visit our website to know more about each product and to stay updated.