What is Fixed deposit?
A fixed deposit means keeping your money with the bank for a certain period of time and not withdrawing during that period and earning a higher rate of interest on that money. After that period the money can be withdrawn or re-deposited. The longer you keep the deposit, the higher the return with higher interest.
Types of Fixed deposite.
There are different types of fixed deposits such as monthly interest fixed deposit, quarterly fixed deposit, reinvestment scheme. Now understand each one.
1) Monthly interest fixed deposit
Once your money is deposited in this, you get interest amount every month on that amount. But this amount is less than the amount of interest earned in a full year.
E.g. If you keep Rs 1000 in fixed deposit for one year at 10% rate you can get Rs 100 every year. But if you keep the same amount in fixed deposit at 10% monthly interest, you will get less than 83.33 per month.
The interest is to be paid in three months but since it is paid every month, a small amount will be deducted.
2) Term Deposit of Quarterly Tenure
In this the interest amount is received every three months, this is a desirable plan for people who are getting pension.
3) Reinvestment Plan
The interest amount earned every month is re-invested in the principal ie the compounded interest amount and principal amount you get at the end of the term.
Insurance on Fixed deposit
For the security of bank customers keeping fixed deposits, the Government of India established a company called 'Deposit Insurance and Credit Guarantee Corporation' under the Reserve Bank of India. Started in 1968. Initially, fixed deposits of Rs 5,000 kept in banks by this company were covered by insurance, but now fixed deposits above Rs 1 lakh are covered.
Get good interest rates on these Posta plans
Posta's savings schemes earn up to 8.7 percent interest. So know these post plans for sure.
PPF :A minimum of Rs 500 and a maximum of Rs 1.5 lakh per year can be deposited in this account for saving. 8 percent interest rate is given in this saving scheme. Also, this amount is exempted from income tax. Also interest is tax free. This scheme has a tenure of 15 years.
Sukanya Samrudhi :Minimum 1000 and maximum 1.5 lakh rupees in multiples of 100 every year for this scheme. This scheme earns 8.5 percent interest. If the money is not deposited in a year, the account is cancelled. Also a penalty of Rs 50 per annum is levied.
Senior Citizens Savings Scheme :A maximum of Rs 15 lakh can be deposited in this account in multiples of Rs 1000 at a time. This savings account pays an interest rate of 8.7 percent per annum. If this account is closed within 1 year, 1.5 percent is deducted. The tenure of this scheme is 5 years.