Must-know Features And Facts Of A Recurring Deposit

Achieving financial independence is a goal for most individuals in India, including you. It means you have sufficient money to live a comfortable life without relying on your next paycheque or depending on others. Savings and investments are the two most viable ways to achieve financial independence. Hence, ensure to save and invest at least some of your monthly income.

A Recurring Deposit is a simple saving and investment option you can opt for. You need to periodically deposit a fixed amount in the Recurring Account for a tenure. You earn a competitive interest rate on your deposits. The deposits and interest earned cumulatively form a significant financial corpus, which helps fulfil goals and deal with emergencies. Here are the must-know features and facts of RD:

Investment amount

You can open an RD by depositing an amount as low as Rs. 10. There is no cap limit to the investment amount, so you can choose any amount that matches your affordability and investment goals. You can choose an amount in the multiple of Rs. 100. Ideally, invest a significant amount in RD as it translates to better interest and, subsequently, a bigger financial corpus.

Investment tenures

You can open a Recurring Account for any tenure between six months and 10 years. This means you can invest in an RD to achieve any goal, be it a small, mid-term, or long-term goal. Consider your financial capacity and investment objective to opt for a suitable tenure. Typically, invest for a longer tenure as it may build a substantial financial corpus.

Investment frequency

Investment frequency is the number of times you make an investment contribution in a year. It impacts your investment returns, so consider it when planning your investments. With RD, you can choose daily, weekly, monthly, or quarterly as your investment frequency.

Most investors consider monthly deposits because they can easily contribute to the RD as they receive their monthly salary. You can consider the same. Remember, you need to pay a penalty if you miss an RD investment instalment. Therefore, consider money availability to decide on the investment frequency.

Interest rates

Every bank offers a different RD interest rate. Learn about different interest rates and compare them to find the best offer. Ideally, invest with a bank offering the most competitive Recurring Deposit interest rates, as this helps you earn a decent return on your investment. Use the RD calculator to gauge your investment’s return-earning potential.

Note that the interest rate also differs depending on the investor’s age. Senior citizens enjoy a higher RD interest rate.

Withdrawals

RD discourages partial or mid-term withdrawals from the investment. However, it allows a premature closure. But you need to bear a penalty and could lose out on interest for the same. Hence, avoid opting for the same.