A Fixed Deposit is like a pool wherein you keep your money with a bank for a fixed time. This pool of money keeps growing at a fixed rate. However, there is always a question that, “Can we initiate premature closure of our Fixed Deposit i.e. before the fixed period if we really need it?” The answer is – Yes, we can.
Premature closure could be due to various reasons like a medical or other emergency, marriage, education, etc. Let’s take the story of Seeta as an example. Seeta is a homemaker who has collected money to invest somewhere. Considering Fixed deposit a safe option as it gives her fixed interest for a fixed time period, Seeta decided to invest in it for 3 years; but suddenly, after 2 years, she decided to withdraw the amount to redo her kitchen.
However, before deciding to prematurely close her Fixed deposit account she made a smart decision and referred the below guidelines before initiating premature closure of Fixed Deposit. These are as follows:
Calculate the penalty charged by the bank: A majority of banks charge a penalty rate when a Fixed Deposit is prematurely withdrawn or closed. Therefore, it is a good idea to calculate such charges before closing the deposit, as it may incur losses on the savings.
- Losing out on interest rate: When a Fixed Deposit is closed before its fixed time, then banks generally do not provide interest as a charge. So, you might lose out on the income on your investment. Though this amount seems small, but when calculated properly with other charges, it becomes a sizeable amount that is lost.
- Look for Fixed Deposits without withdrawal penalty: You can also look for Fixed deposits which do not charge any penalty for premature closure. However, this option is very rare and difficult to find.
- Cumbersome procedure: To prematurely close the Fixed deposit, you require a lot of documentation to go through, fill various forms, meet bank officials, which can take a toll on you and your money. So, why lose the money if you can earn on your deposit after some time?
- Explore other options: If there is an emergency and you need funds, then you can always explore other options wherein you do not have to close your Fixed Deposit. Like Seeta, you can also look for a Consumer Finance Loan to redo her kitchen without hampering your Fixed Deposit.
Seeta had never thought that she would actually lose out on so many benefits if she had prematurely closed her Fixed Deposit account in a hurry. Similarly, on knowing the above points, we are sure you must have understood that for any investment options to work effectively and earn more, it is best to leave it until its maturity.