Fixed Deposit vs Recurring Deposit
Last Updated : Jan. 31, 2022, 11:48 a.m.
Investing your money is the only way to build wealth. When it comes to investing most people look for returns that come along with security. These are two investment options that offer assured returns on your investment. Fixed Deposit (FD) vs Recurring Deposit (RD) is the most popular investment topic in India, particularly among low risk investors. The main benefit of investing in a fixed deposit scheme or recurring deposit plan is that the returns are guaranteed and risk-free. However, many investors are unsure whether they should invest in an RD plan or an FD scheme. All major banks and financial institutions provide both RD and FD as investment products. Both schemes allow you to invest a particular amount and receive a specific return on that amount. Investors will get both the capital and the interest at the end of the tenure.
What is Fixed Deposit?
Fixed deposit or FD, is an investment option in which the time of investment and the return on the investment, are both pre-determined. The user has to deposit an amount only once, at the beginning of the FD tenure. The tenure of an FD investment can range from 7 days to 10 years, and people know this as the period of investment. In some cases, it can be up to 20 years. The fixed deposit interest rate can however, range from 6.50% to 8.00%. The fixed deposit interest rate depends on the amount that you are investing among other factors. The interest rate on FD is slightly higher than the interest rate on RD.
What is Recurring Deposit?
A recurring deposit is also a risk-free investment. While investing in a RD, the investor deposits a set amount of money in a bank or a non-bank financial institution (NBFC) every month. The interest rate is set and does not change during the course of the RD’s term. Generally, the length of an RD’s contract can range from 6 months to 10 months. You can even use the recurring deposit calculator to calculate your maturity amount. The maturity amount on a recurring deposit in the amount that you will receive at the end of your investment tenure.
Difference Between FD and RD
| Basis of Differentiation |
Fixed Deposit
|
Recurring Deposit |
|---|---|---|
| Frequency of Deposits | Only Once | Every Month |
| Tenure | The investor can choose a tenure from 7 days to 10 years. | Tenure for RD usually varies from 1 year to 10 years |
| Rate of Return | The interest rate can vary from 6.50% to 8.00%. However, the rate can be influenced by the amount that you are investing. | The interest rate on RD investment can vary from 5.25% to 7.90%. The rates can however, differ depending on the bank as well as the investment amount. |
| Income Tax Saving Option | Available with a lock in period of 5 years. | Not Available |
| Minimum Deposit Amount | INR 100 | INR 1,000 |
Where Should You Invest Your Money?
Fixed deposits and recurring deposits are both low-risk investments. A fixed deposit will make you earn more money on your investment than a recurring deposit, although some people prefer recurring deposit as an investment option because they don’t have enough money to invest a big amount in one go. As a result, it is advisable to make your decision based on how much money you are willing to invest.
Recurring deposit is the perfect investment option for individuals who do not have a large sum of money to invest at once, but can manage to set aside a little amount each month. Every month, deposits will be made, and at the end of the RD term, the whole amount or the maturity amount will be credited to your connected savings or current account. Whereas if you have a good sum of money to invest, then a Fixed deposit can be a perfect option. Fixed deposits can give you comparatively higher returns on your investments than recurring deposits. Since the investment principle is also larger from the start. You will be able to get greater fixed deposit interest rates as well as greater returns on your investment. Another great benefit is that you can get a loan against your fixed deposit investment.
