FD and RD are both safe savings tools. But which one suits your need better?
What is a Fixed Deposit (FD)?
A fixed deposit (FD) is a tenured deposit account provided by banks or non-bank financial institutions which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account.
The term fixed deposit is most commonly used in India and the United States. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and as a bond in the United Kingdom.
A fixed deposit means that the money cannot be withdrawn before maturity unlike a recurring deposit or a demand deposit. Due to this limitation, some banks offer additional services to FD holders such as loans against FD certificates at competitive interest rates.
Banks may offer lesser interest rates under uncertain economic conditions. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years.
What is a Recurring Deposit (RD)?
You deposit a fixed amount every month and earn interest.
Comparison Table
| Feature | FD | RD |
|---|---|---|
| Deposit type | One-time | Monthly |
| Flexibility | Low | Medium |
| Interest Rate | Similar | Similar |
| Best For | Lump sum savings | Monthly savers |
When to Use FD?
You have a large amount to invest
You want guaranteed returns
When to Use RD?
You want to build savings gradually
You earn monthly salary
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