Types of Fixed Deposits

Types of Fixed Deposits
As the name suggests, a fixed deposit (FD) is a fixed sum of money that is in custody in an FD account for a pre-determined time period earning fixed deposit rates. The tenure for a fixed deposit ranges from 15 days to 3 years and the fixed deposit rates vary between 3 % and 7.5. The time period of an FD may be extended up to 10 years as per the requirement of the depositor. A FD account normally yields greater fixed deposit rates than a standard account, because of its fixed period of time. FDs are also known as term or time deposits. FDs can be classified as:
• Certificate of Deposit
• Revolving Bank Term Deposit
• Unchanging Term Deposit
• Holiday Account

Certificate of Deposit (CD)
A CD is a kind of fixed deposit account that can be bought in varying sums from a traditional bank, credit union, or other depository organization. A Certificate of Deposit is a commercial document that substantiates the financial value of the deposit made; its date of maturity and the rate of interest are valid on the sum loaned. The maturity period of a CD ranges from one month to five years. Interest rates accumulated on CD are quoted on a yearly basis.

Revolving Bank Term Deposit
This deposit renovates itself mechanically for another period of the same length subsequent to the expiry of its loan period. Investors can deposit money into a revolving term account via a cashless transfer by direct transfer or from an existing account. The period of this deposit varies from one week to one year.

Unchanging Term Deposit
This deposit account is also called as a single term deposit, and it does not renovate automatically following its date of maturity. An unchanging FD can be opened with a maturity period that ranges from one month to 36 months.

Holiday Account
The other name of a holiday account is the Christmas club account, which is a special category of fixed term deposit that permits a depositor to save, and put in, small denomination money until the account matures. Money cannot be taken out of the account until it reaches the date of maturity.

Summary: Choosing the type of FD account depends upon the requirement of the depositor.

Calculating the anticipated yield of the fixed deposit

Fixed deposit is one among the schemes introduced by banks to persuade people to deposit their hard-earned money for a particular period of time. Though the interest on fixed deposits offered by banks are less than other private financial institutions, banks offer a guarantee for your deposited sum. Before depositing the amount in the fixed deposit schemes you can calculate the anticipated yield by making use of a fixed deposit calculator.

Almost all banks and private financial institutions operating fixed deposit schemes feature their concerned fixed deposit calculator on their official website. Just by entering the principal amount deposited in the fixed deposit scheme, the interest rate and the period of deposit, you can calculate the expected yield of the fixed deposit by making use of the fixed deposit calculator. You can even calculate the yield by making use of financial calculators or Excel spreadsheets.

Summary: An online fixed deposit calculator enables the depositor to calculate the anticipated amount of the fixed deposit.

Facts about bank FD interest rates

A bank fixed deposit is a category of deposit that a consumer makes for a prearranged time period in a bank at a known bank FD interest rates. There is probably a fine involved if you take out your money earlier than the date of expiry of the fixed deposit. The term fixed deposit that is used in India is analogous to a certificate of deposit in US.

Most people are inclined to be interested in investing their money into fixed deposits and get higher rates of yield in the form of higher bank FD interest rates. They have less of an enticement to set aside money and deposit it into fixed deposits when interest rates are low down. The higher the bank FD interest rates a bank offer on its fixed deposits, the more expected it is to draw a higher rank of deposits.

Summary: If you have funds in a fixed deposit account, you can take it out before the termination of the deposit period, but you will probably pay a fine to accomplish so. 

Know the facts of fixed deposit rates

A Fixed Deposit is the cash deposit at a bank or other financial institutions that cannot be taken out for any kind of expenses for a particular tenure or time period. Normally, the fixed deposit rates, that is, the interest rates on fixed deposits, are akin to your savings account, but it earns a higher interest rate than your savings account. The maturity amount and the total interest depend upon the period of the fixed deposit and the fixed deposit rates that the bank offers on the deposit. If at all any emergency financial crises exist, you can cancel your fixed deposit at any time, But, a portion of the amount will be levied a penalty for cancelling your Fixed Deposits before the maturity period.

Summary: You can as well avail a loan from your fixed deposit with a nominal rate of interest slightly more than your fixed deposit rates.  

Know your compound interest on fixed deposit through a fixed deposit calculator

The fixed deposit calculator facilitates you to know the worth of your deposited amount when it gets matured. Normally the interest on fixed deposits is being paid on quarterly, half-yearly or yearly compounding.  The genuine return of the deposited amount is the effective yield, and it depends on the frequency of compounding and the interest rate.

The condition of compounding arises when interest on the fixed deposit is added to the sum actually deposited so that from that instant on, the interest that has been included also earns interest. This adding up of interest to the deposited amount is called compounding. This interest can be calculated by making use of a fixed deposit calculator. 

Summary: Most of the banks and other financial institutions feature the fixed deposit calculator on their respective websites to ease the calculation of the compounding interest and the worth of the sum deposited in the fixed deposit category.