4 ways to earn higher interest on your FD investment
Fixed deposits remain one of the most trusted investments in India for people of all ages and all backgrounds. They promise a guaranteed interest, and with good fixed deposit interest rates, are an attractive option for those seeking safety and good returns alike.
There are many ways in which you can ensure higher interest on your fixed deposit account, thereby getting the most out of your investment:
Do Your Research:
It is essential to look at fixed deposit interest rates before deciding on a particular scheme. You must also keep the tenure in mind, and see if it aligns with your requirements. Fixed deposit interest rates may vary across different banks, and different schemes within those banks. You also need not limit yourself to banks; financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits, known as company fixed deposits, and usually offer higher interest rates.
Deciding Your Tenure:
Interest rates may be the fundamental prerequisite before settling for a scheme, but you cannot discard the time period. Fixed deposit interest rates can be calculated at different stages: quarterly, half-yearly, yearly or at the maturity. Consider this example with bank A and bank B. Bank A offers 9% interest per year on a five-year fixed deposit and calculates the interest on a quarterly basis. Bank B offers you the same fixed deposit interest rate for the same duration. However, it computes the interest on a yearly basis. Therefore, Bank A will fetch you more interest compared to Bank B as it calculates interest more often.
Splitting Your FD:
A 10% TDS (tax deducted at source) is charged on fixed deposits if the fixed deposit interest rate is more than Rs.10,000 per year. A good way to avoid TDS is by splitting your fixed deposits. Instead of opening one account and investing all your money in it, you can split it between two or more lenders and divide the amount amongst them, the way you want. You can also avoid TDS if you open fixed deposit accounts in different branches of the same lender. This also has another positive: If you need some money urgently, you need not break all of your fixed deposits. You can withdraw the desired amount by breaking one or two accounts, and the rest of your accounts will still guarantee you the promised fixed deposit interest rate.
Diversify Your Investments:
Investing in a fixed deposit or even a company fixed deposit does not mean that you should commit to it exclusively. For example, you can invest the interest you have earned on your FD in a mutual fund SIP, in combination with equity related schemes. This will help in diversifying your investment to a great extent, which is, without doubt, the most profitable option.
Opt for A Loan against FD:
However safe and risk-free a fixed deposit may be, it is always wise to account for future emergencies. With an FD, you may opt for a Loan against Fixed Deposit. This provides liquidity in case of an urgent situation, without having to break the fixed deposit. Take the example of Shubhangi Datta, who was relieved that she had made provisions well in advance when her father-in-law’s medical expenses hit the roof. She has vowed not to touch her FD until its maturity; however, life does not always work the way we plan. Shubhangi was able to utilise the overdraft facility at her disposal without any complications. Lenders like Bajaj Finserv offer this kind of flexibility to you.
Consider opting for an FD account with Bajaj Finance, as it offers high interest rates and checks all the right boxes.