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Is the auto-renewal option in fixed deposits right for you? Here is an expert opinion

fixed deposits

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FIXED DEPOSITS (FDs): FDs are a form of fixed deposit.

An FD is a bank-provided financial portion. Like a financial portfolio, it is critical in anyone’s life. If you need to invest in the short, long, or medium-term, a fixed-income investment is the best option. The maximum duration for a long-term deposit is 10 years.

FIXED DEPOSITS COME IN A VARIETY OF FORMS:

  1. Cumulative fixed deposit: This form of fixed deposit allows you to reinvest your interest.
  2. Non-Cumulative fixed deposit: This is a form of FD that pays interest monthly and annually.
  3. Regular fixed deposit: This arrangement does not require a separate account and has a term of 7 to 10 years. This system has an interest rate that ranges from 4% to 7.50 percent.
  4. Tax-saving fixed deposits: This is a program that allows you to subtract money from your taxes under section 80 C.
  5. Flexible fixed deposits: This account combines the advantages of savings and a fixed deposit account.
  6. LONG-TERM FUNDING DEPOSITS: It’s a kind of savings account. You can put 5 to 10 years or even more into this.
  7. Senior citizen fixed deposits: All banks offer high interest rates in senior citizen fixed deposits. Senior citizen FDs have interest rates ranging from 2.50 percent to 7.75 percent.

REASON FOR INVESTING FIXED DEPOSITS:-

  • Risk-free
  • Fixed return
  • FD It can last anywhere from 7 to 10 years
  • Enable you to take the loan
  • Good interest rate
  • Easy to monitor 
  • No hidden charge
  • FDs are the best investment method
  • Flexibility to fund withdrawals
  • Easy way to meet short terms goals

IS THE AUTO-RENEWAL OPTION IN FIXED DEPOSITS RIGHT FOR YOU?

Banks’ auto-renewal option is a useful function that allows you to reinvest the maturity proceeds in fixed deposits (FDs). Depositors can save money by choosing this option instead of losing interest if they don’t renew their FD. In the case of online FDs, the bank credit the maturity proceeds to the savings bank account.

Investing in fixed deposits, which not only help you save money but also gain a substantial return, is one of the safest ways to protect your money in the bank. The depositor deposits the money only once when opening the account under the FD system. The interest rates on FDs vary depending on the bank, the amount of money you invest, and the term you want.

EXPERT’S SAYS

However, experts warn that if you choose the auto-renewal option for your FD, you will not get the best interest rate, particularly given the current low-interest-rate environment. As a result, for greater versatility, it would be preferable to do it manually.

“Auto-renewal policies differ from bank to bank. Others may renew for a particular duration, such as one year, while others may renew for the same period as the initial FD. However, this may not be the best choice available to you. So, if you were manually renewing the FD, you could do so for 15 months to get the best offer,” said Adhil Shetty, CEO of BankBazaar.com, a financial services website.

Interest Rates on Fixed Deposits in 2020

Tenure of Bank FD Interest Rates

  • 3.00% – 6.25 percent HDFC From one day to ten years
  • Housing Finance from PNB 7.20-8% Around 12 to 120 months
  • ICICI Bank is a bank in India. 3.25 to 6.25 percent From one day to ten years
  • Axis Bank is a financial institution based in India. 6.75 percent – 3.50 percent From one day to ten years.

As a result, auto-renewal may not be suitable for depositors who want more flexibility and power.

SHOULD YOU OPT FOR THE AUTO-RENEWAL FACILITY?

There are a few drawbacks to the auto-renewal feature. However, experts warn that if you choose the auto-renewal option for your FD, you will not get the best interest rate, particularly given the current low-interest-rate environment. As a result, for greater versatility, it would be preferable to do it manually.

Furthermore, keep in mind that auto-renewal policies differ between banks. Although some may renew for the same amount of time as the original FD, some may have a policy of only renewing for a certain amount of time.

CONCLUSION

There are several benefits to investing in fixed deposits, including the ability to earn higher interest rates. You may compare FD rates and make an informed decision, as interest rates differ from one bank to the next. You will be able to satisfy your desires once they have matured. You can measure the return using fixed deposit calculators.

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