The choice between a fixed deposit account and a saving account is not hard to make. As an investor you need to understand how to use these two types of accounts to work for you. Read on for clarity.

Fixed Deposit Account:

 A fixed deposit or FD account is a financial instrument offered by banks and financial institutions that provides a higher rate of return than a saving account. The only catch is that an FD does not allow access to the investment for the term you have signed up for. However, you may cancel the FD account and liquidate the investment at any time.

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Saving account:

A saving account is an interest bearing account that provides a reasonable rate of return. A saving account however requires you to have a minimum monthly balance as determined by the bank or financial institution.

A saving account is an account rather than a financial instrument, which enables you to access a host of banking services such as:

  • Internet banking, which provides ease of access to your saving account and enables you to transfer amounts, make investments in other services offered and keep a real time tab on your account without having to visit the bank branch.
  • An ATM/Debit card, is a great way to pay for purchases without the hassle of carrying money. The card is secure and also allows you to withdraw cash from the ATMs.
  • A cheque book, which enables you to make payments in places that do not accept an ATM/Debit card, and is typically used for larger payments. A cheque book also comes handy when you need to make the payment at a later date.

An FD account is a financial instrument offered by a bank, financial institution or NBFC (no-banking financial company) to investors. This instrument allows the account holder to set aside a certain amount of money for a predetermined period of time at a predetermined rate of interest. The interest on the FD account can be availed every quarter or at the end of the term of the FD account. This instrument carries a higher rate of interest than offered on a saving account; however, it limits the liquidity of the account holder. These days, banks and companies offer to convert the FD account into cash in your account almost immediately. This conversion may incur some loss in interest earnings.

When You Should Opt for an FD Account Or A Saving Account?

  • As an investor you should use an FD account when you are considerably certain that you do not need the amount set aside in the FD account. For day-to-day access to money, i.e., for everyday expenses, it is best to use a saving account.
  • An FD account is a great way to preserve capital, which may be spent if not invested. In addition to preserving the capital, an FD account also helps to earn interest on the deposit.
  • If you are looking for a stable and fixed income from large deposits, an FD account is the right investment option. While interest rates may vary over time, you have access to your investment while earning income.
  • Senior citizens are offered a better rate of return in an FD account, whereas there is no such benefit in a saving account.
  • A fixed deposit can also be used as collateral for a loan.

At Bajaj Finance Limited, you are treated to a high rate of interest on FDs, along with an easy online application, which allows you to open an FD account instantly. Start small and have access to your deposits when you need them.

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