Many financial instruments are available in the market but it is up to you to decide the options that suit your investment goals and requirements. When it comes to secure options, the most popular instruments are fixed deposit and recurring deposit i.e. FDs and RDs.
Both FDs and RDs grow your investments at an interest rate that remains unchanged over the tenor. However, in the case of FDs, you need to invest the entire deposit amount at once whereas the RDs allow you to deposit a relatively smaller amount every month.
FDs are suitable for those who want to achieve better returns over a fixed tenor whereas RDs inculcate the habit of saving regularly. Let’s see the main differences between a fixed deposit and a recurring deposit:
Table of Contents
Interest rates
Recurring deposits usually provide a higher interest rate than a savings account and the interest rates range from 5 to 6.5% depending upon the financier and tenor chosen by you.
Recurring deposits even offer better FD rates than some bank FDs. However, fixed deposit plans offered by finance companies enable you to earn higher returns as they offer slightly better FD rates.
For instance, Bajaj Finance offers an FD interest rates of up to 6.85%. This makes it one of the highest paying FD in India currently.
Tenor
The Fixed Deposit and Recurring Deposit offered by various financiers come with different tenor options. The RD tenor usually varies between 1 to 10 years whereas a tenor ranging from 7 days to 10 years can be selected while investing in an FD.
It means that both FDs and RDs offer a flexible tenor range. Some finance firms like Bajaj Finance provide a tenor ranging from 12 to 60 months. You can also choose the option of auto-renewal for multiplying the returns quickly.
Interest calculation methods
In the case of RDs, only the first deposit attracts interest for the entire tenor whereas the subsequent deposits generate lesser interests as they are locked-in for a lesser period.
Fixed deposit schemes generate a higher interest as compared to RDs as the entire investment amount earns interest for the entire tenor. Interest rate calculators can be found for both RDs and FDs on the internet. These calculators enable you to calculate the interest gains and returns accurately before investing.
Senior citizen deposits
An additional FD interest rate is offered to senior citizens on both RD and FD plans. However, the extra interest rate proves to be more beneficial when it comes to an FD due to its interest calculation method.
Some finance companies like Bajaj Finance provide an additional 0.25% senior citizen interest rate. Also, the option of choosing periodic interest payouts provided by non-cumulative FDs enables them to mitigate their regular expenses.
Moreover, non-seniors get a 0.10% additional FD rate on investing in its FD plans by using an online FD form. Also, it is safe to invest in its FD schemes as credit rating organizations like CRISIL and ICRA have given it high ratings for securing the invested capital of the investors.
Both FDs i.e. term deposit plans and RDs i.e. recurring deposit plans have few similarities such as flexible tenor, constant interest rates, etc. However, there are vast differences between them when it comes to investment methods, interest calculation methods, returns, etc. Therefore, you must analyze their features and invest smartly to grow your savings quickly.
It is better to invest in a company FD like Bajaj Finance as it not only provides a higher FD rate but also offers a flexible tenor and options like FD calculator, loan against FD, online investment procedure, etc. Moreover, it ensures the safety of your deposits as credit rating organizations like CRISIL and ICRA have conferred high ratings to it when it comes to the stability and safety of your deposits. The above details were the difference between Fixed Deposit and Recurring Deposit.
