A fixed deposit (FD) is a secure way of growing your capital. As your age crosses the magic figure of sixty, your liabilities grow. Add inflation to it, and the amount you need to sustain yourself increases massively.
An FD account is easy to open, generates higher returns, and offers more flexibility than many other investment options. Unlike financial instruments like the Senior Citizen’s Saving Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY), it has no limit on the maximum amount you can invest. Additionally, if you choose a financial institution that provides the highest fixed deposit interest rates, you can get inflation-beating returns.
Reasons Why Senior Citizens Need to Create an FD Account
An FD account brings with it many benefits, such as high-interest rates, easy account opening process, flexible withdrawal options, loan facility, and value creation.
While fixed deposit interest rates are typically high, not all financial institutions offer the highest rates. When you want to get higher than the average interest rates, you have to explore corporate FDs. A corporate FD account with a reputed housing finance company like PNB Housing enables you to get up to a 6.95% interest rate per annum. Before investing in a corporate FD account, check the company’s credit rating. If you want your capital to be safe, choose companies that provide CRISIL FAA+, or CARE AA rated FDs, as they are considered the safest.
Easy Account Opening Process
Compared to other investment options like SCSS, PMVVY, or Post Office MIS, an FD account can be created without any hassle. If you invest with a bank, you might have to visit the branch and fill the application form. In contrast, when you open a corporate FD account, the financial institution sends a representative to your place, who helps you open the account. However, you need to keep a photocopy of your PAN and Aadhar card ready for quick processing of the application.
Flexible Withdrawal Options
You may invest in two types of FD accounts – cumulative and non-cumulative. In cumulative deposits, you enjoy the benefits of compounding, and your capital grows more. A non-cumulative FD account entitles you to receive the interest amount after a fixed interval, which may be monthly, quarterly, half-yearly, or annual. Intelligent investors ladder their investment and receive the highest fixed deposit interest rates.
Although you can close your FD account anytime you want to, doing so will reduce the effective interest rate. Financial institutions levy a penalty on premature withdrawals. However, they offer a loan facility against fixed deposits, in which you can get a loan of up to 75% of the invested amount at a 2% higher interest rate than the highest fixed deposit interest rates. You can negotiate the repayment term and pay conveniently.
With every passing year, the cost of products and services increase. An FD account keeps your capital safe and helps it appreciate at a healthy rate. You can close the account anytime, meaning you can use the account for building an emergency corpus. Moreover, it gives you the purpose to save, thereby motivating you to save whatever little you can. A little sacrifice now can provide you with a larger amount later.
Fixed deposits have withstood many turmoils. However, it has always held its ground. An FD account inculcates the habit of saving, and the funds come in handy when you face a cash crunch. Invest in a corporate company whose fixed deposits provide the highest interest rates to facilitate faster growth.