Fixed deposit rates are on the rise nowadays, due to the lack of liquidity in the money market. The investors of FD are sitting on multiple choice with banks, NBFCs, debt mutual funds, NCDs and other similar options. While each option has its own merits and demerits, there is a common purpose for any investment: earn a higher return from your investment. Here is the quick guide to earn more money from your fixed deposits.
Chose Cumulative Fixed Deposit
Usually, every bank and NBFC (Non-Banking Financial Company) offers two types of FDs: Cumulative and Non-Cumulative. In the case of cumulative FD, the interest amount is credited back to the principal amount every three months. Hence, your FD gets the power of compounding, as your interest on fixed deposit amount starts earning further interest. In the long run, you can accumulate sizable amount and see the growth in your portfolio. If you are working professional, or if you have the source of regular income, consider investing in cumulative fixed deposit. Not only you will get the power of compounding, but the rate of interest is also higher in the case of cumulative fixed deposit.
Senior Citizen FD
Almost every bank and NBFC offers special interest rate for senior citizens. The rate of interest is higher by 0.25% to 1% depending on the type of FD, maturity period, financial institution and similar other factors. You can consider investing in FD in the name of senior citizens of your family. The government also give more relaxation in income tax for senior citizens. You can get advice from your tax consultant for tax-related guidance to invest in senior citizen FDs.
Renewal loyalty is a relatively new concept. The reputed NBFC Bajaj Finance provides additional interest rate when you renew your FD. The renewal rate is usually 0.25% higher than the regular interest rate. By properly strategizing your investment, you can earn higher interest not only in current FD but also secure better returns for your future investment by way of renewals.
As a thumb rule, longer the maturity period, higher the interest rate. For example, FD with six months of maturity may give you 7% interest rate, while that of one year of maturity may give you 9% interest rate. In the long run, and with a higher amount, you can see apparat difference in your portfolio when you chose the maturity period carefully to earn a higher interest rate. Moreover, by selecting a higher maturity period, you can lock your investment at a particular interest rate. Hence, it protects your portfolio if the interest rate falls in the future. You can use Online FD Interest rates Calculator to know the impact of interest rate and maturity period on your investment.
Internet FD: Invest with the Speed
If you chose to make a Fixed deposit in the bank, you might have to visit it multiple times to complete your paperwork. If any document is missing or additional information is required, your FD opening is delayed. This process makes multiple losses to you: First, your efforts and time is wasted in unproductive tasks and second, until FD is opened, your money is blocked without earning any interest. The better option is to opt for Online FD. Nowadays every reputed bank and NBFC offers the use of the internet by conducting e-KYC through AADHAR card and PAN card. Consider taking advantage of the same. As soon as the process completes, your FD is opened instantly,and your investment starts earning interest from day zero.
Right Mix of return and safety
Nowadays, there are many options in the hands of investors. In the recent past, some NBFCs have earned a bad name because of default and delay in repayment. Some nervous investors settle with much lesser interest rate by opting bank FDs. However, you can use the tools like credit rating of the NBFC to filter out the bad from the good. Apart from credit rating, it is recommended to check the past ten years’ repayment history of the financial institute. By this process, you can eliminate risky investment and opt quality fixed deposit to grow your portfolio. You can earn ‘better than bank’ interest rate with ‘bank-like’ safety in the process. Little bit research and objectivity will grow your portfolio exponentially in the long run.