Almost everyone is familiar with bank deposits. Bank deposits are the most common and traditional way of investment option available and used by the majority of the people. Bank deposits make the best investment option with assured and secure return on investment. Bank offers a fixed rate of interest on the amount available in your saving or current account over a certain period of time, most probably monthly or quarterly.
Recurring Deposits (RDs), on the other hand, is slightly different deposit compared to regular bank deposits mentioned above. Banks provide recurring deposits, which are a popular investment option for the majority of investors. RDs, like FDs, are safe and secure. It is, nevertheless, best suited for paid individuals with a limited yearly income. This investing option requires an individual to put aside a certain amount of money each month for a set period of time. The principal amount, as well as any interest received, is repaid at maturity. Having to deposit money on a regular basis aids in the development of a saving habit. Also, the interest rate bank offers on the RDs are higher than the regular bank deposits.
What makes RDs Better Than Bank Deposits?
1. Investment In Modest Quantity
The majority of banks provide a low-cost monthly payment option. While some banks also provide quarterly or half-yearly instalment recurring deposit schemes. This ensures that those with little financial resources can engage in such programmes.
2. Saving With A Purpose
Regular monthly savings earn interest and contribute to the establishment of a short-term savings account. With RDs it is possible to arrange instalments to build up needed capital for future usage. By requiring you to make regular monthly contributions, a recurring deposit plan pushes you to save. It is especially beneficial for paid individuals who have a number of financial objectives to meet on a certain pay. To determine the maturity amount for a specific payment amount, you can use a recurring deposit interest calculator, which is available for free on most bank websites.
3. Systematic Investement
A regular payment is a smart way to stay on track with your investing. Because the instalments must be paid that much each month on a specific date, the investor is required to set aside the amount of the instalment for RDs. It instils discipline as well as the habit of saving up to the instalment amount.
4. Minor-Focused Savings
Any individual above the age of ten can start an RD account with their respective bank. Most banks allow youngsters to create regular deposits using a parent's or legal guardian's joint account. This facilitates the creation of investments for the benefit of the minor.
5. Highrer Interest Rate
Both FDs (fixed deposits) and RDs pay the same interest rate to customers by most banks. As a consequence, they may be used effectively as an income source. Investment income is compounded quarterly and in some cases monthly, allowing the investor to receive both interest and capital. Seniors may be eligible for a higher rate of interest on recurring deposits.
6. Availability Of Loan
RDs allows you to lend money from the bank on the security of RDs. Most banks will lend you money if you have an RDs. This loan might be as much as 95% of the RDs amount. This can be utilised in the case of an emergency.