Savita is a homemaker who has a habit of saving money every month. Someone told her she should invest her savings in a FD so that she can keep earning fixed interest on it for a fixed period of time. But Savita was skeptical. She had picked up several myths from everyday life, which she attempted to debunk by collecting some solid facts.
Myth 1: You can open a Fixed Deposit account only if you have saved a huge sum of money.
Fact: To open a Fixed Deposit account, you do not need a lot of money. These days, banks offer Fixed Deposits at minimum amount. AU Bank offers a Fixed deposit account with a minimum balance of INR 1,000. Apply Now.
Myth 2: You can open a Fixed Deposit account only with banks.
Fact: This is not completely true. Apart from banks, various financial institutions and companies offer Fixed Deposits. However, you need to be sure about such institutions, as they are less secure than banks.
Myth 3: You earn more if you take interest payments at regular intervals.
Fact: Generally, you earn more on Fixed Deposits if you take an interest at the maturity of the deposit. If you take interest payments at regular intervals like monthly, quarterly or yearly, then your interest gets divided; but if you take the money at maturity then you get your initial invested money with compounded interest, which is more profitable.
Myth 4: Tax has to be paid on Fixed Deposit.
Fact: This is good news because now we have options for opening tax-saving Fixed Deposists. Moreover, if our annual income from Fixed Deposit does not exceed INR 10,000, then we do not have to pay tax. There are other options for senior citizens like filling Form 15G, 15H to save taxes on fixed deposit earnings.
Myth 5: If we need money, then premature withdrawal is the only available option.
Fact: If there is an emergency and we need money, then we can withdraw some amount from our Fixed Deposit and keep on earning interest on the remaining amount. Otherwise, if our Fixed Deposit is linked to a savings account, then money could be swept in from the latter to former.
Myth 6: It is very difficult to close a Fixed Deposit.
Fact: Banks or other institutions cannot tie your money with strict terms. The process to close a Fixed Deposit is not tedious. However, the process varies from bank to bank. Though it is highly suggested that this should be taken as the last resort as there may be a premature FD closure penalty levied to you.
When Savita resolved all her apprehensions, she started considering Fixed Deposit as an option to invest her savings. You too can study more about FD and invest in this risk-free instrument.
Learn more about how does bank calculate interest on FD(Fixed Deposits) and also read what is a fixed deposit