Rising Fixed Deposit Rates: Is It Time to Break or Reinvent Your FD?

The interest rates of FDs are rising which is good news for Fixed Deposit (FD) investors. The Reserve Bank of India (RBI) has hiked the rates to control the growing inflation. As the rates are rising should you break your FD and create a new one at a higher rate? FDs offer an option of premature withdrawal but there are a few points to consider.

Most banks are offering an interest rate of 7-8% and some of the small financial banks are offering 9%. Banks are offering senior citizens higher interest rates than those of general people. Seeing these lucrative FD interest rates many people think of withdrawing their FD and reinvesting to get better returns.    

You should consider getting an FD when the interest rate is higher if you have cash in your bank accounts. 

FD withdrawal

You will have to pay a penalty if you close an FD before its tenure ends. The penalty charges are in the range of 0.5% - 3% of the offered interest rate. Some banks charge 0.5% on withdrawal of FD up to ₹5 lakhs before maturity. Some charge a 1% penalty for all tenures. 

FD interest rates

Breaking an FD

Breaking an FD is not advisable if its maturity date is in the next six months. First, check the maturity date of your FD. If it is not near its maturity date and there is enough time for deposit then you should consider breaking your FD.

When you break an FD you will not get the same interest rate as when you get an FD. Therefore you should break an FD when they are more than one year from maturity or new. A 1% or higher differential rate of interest from the current offerings is good enough.

For example, suppose you opened an FD for ₹1 lakh at an interest rate of 7% two years back. You decide to break the FD after 1 year. The interest rate for the FD back then was 6% therefore when you pre-close your FD after 1 year the bank will pay you 6%.

Taxes on FD

The tax is applicable on the FD based on the interest earned on the new and the existing FD. If you come under the tax bracket of 30% then it can be a significant amount.

If you are interested in investing in stocks then you can check out the Appreciate app to trade online in the stock market.

Comments

Post a Comment

Popular posts from this blog

Understanding the Latest Social Media Trends

Image
New social media platforms evolve every year and you have to keep up with the rapidly changing landscape. Businesses need to adapt to these new thriving platforms. Social media is developing continuously and integrating new technologies like AI and virtual reality. Businesses need to understand social media trends to safeguard the effectiveness of their social media marketing strategy. It is important to know how individuals engage, network and market on social media platforms. Understanding social media trends is important for the success and relevance of a business. When you stay updated it ensures that your business is not left behind and maintains its appeal. You also would not trust a professional who does not keep up with the latest trends and technologies. Similarlly, users may get put off if you use outdated social media platforms and techniques. Social media platforms are constantly evolving and introducing new features, advertising processes and more. You should take time an
Read more

What Is The Juice For Weight Loss Routine?

Image
Juicing for weight loss If you have excess weight then it can lead to health problems. One of the ways to lose weight is to follow a juice diet in which you consume only juices. This routine can be followed for 3, 5, 7 or 10 days and then repeated after 3 months. Your body gets exposed to toxins from processed foods and saturated fats and sugars. Your body gets overloaded with these toxins and you end up putting on weight. You need to eat more healthy food like fruits and vegetables. People usually do not eat the required amount of fruits and vegetables daily. Juicing is a convenient way to get your daily intake of fruits and vegetables.  In the juice diet, you consume only juices made from fruits and vegetables for a specific period. The juices contain healthy nutrients like vitamins, minerals and phytochemicals. These juices do not have to be digested and get absorbed in the body quickly. You intake only healthy juices during the routine. Citrus fruit juices are high in vitamin C, ca
Read more

How School Furniture Empower Learning Environment?

Image
School Furniture | Image Resource: pexels.com Establishing a positive learning atmosphere is one of the crucial tasks a school administrator needs to face. For that, you need to enhance the overall grace of the school by including right type of color as well as furniture. Bright as well as cheerful classrooms contribute a lot in encouraging a positive environment for learning. Factors Regarding Selection of Right School Furniture Children will learn whatever they see. School plays a very important role in teaching students about the actual picture of the world.  With the right school furniture that is colorful will definitely enhance their excitement to a high extent. Some factors that need to be taken at the time of making the selection of best furniture include: Aesthetics Comfort Size Durability  Space Budget Regardless of the fact that whether the school is an old or a new one, aesthetically designed classroom furniture chosen will definitely have a positi
Read more