Fixed deposit myths debunked: What you need to know

Posted on Wednesday, January 31st, 2024 | By IndusInd Bank

Fixed Deposits(FDs) are an essential part of a smart savings strategy. They earn interest while keeping your savings secure and protect your hard-earned money from unnecessary withdrawals, market risks, and impulsive spending.

Fixed deposits are known for their lower risk, simplicity, and assurance. But common myths relating to this instrument tend to hold some individuals back. Some believe that their money will be rigidly locked away in FDs until maturity, while others think that FD returns are too low. It’s essential to debunk these myths so that you can leverage FDs and all the benefits they offer.

Myth 1: FDs are illiquid
Fact: IndusInd Bank FDs are flexible

While fixed deposits have a fixed tenure, they are not entirely locked. You are allowed to withdraw your funds anytime. However, this might come with a penalty, which varies across banks.

A good option is IndusInd Bank’s Fixed Deposit in case you want to access some of the FD returns regularly. With options for regular payouts and various interest payment frequencies such as monthly, quarterly, half-yearly, yearly, or at maturity, you can customise your FD strategy as per your expectations.

What’s even better? You can book an FD with IndusInd Bank online without any paperwork or lengthy formalities, and enjoy some of the best FD interest rates being offered in the industry, flexible tenures, and a hassle-free investment process.

Myth 2: FDs offer low returns
Fact: You can earn high interest with FDs

While bank FD interest rates are not as high as stock market returns, they are far from unprofitable. Fixed deposits often come with interest rates that are higher than regular savings accounts. These rates depend on various factors like your deposit tenure, inflation, credit demand, the monetary policy set by the Reserve Bank of India (RBI), and global economic conditions.

Myth 3: All FDs have the same tax benefits
Fact: There are special tax-saving FDs available

If you choose a tax-saving FD which comes with a fixed tenure of five years, you get additional tax benefits. You can claim a tax deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961 if you follow the old tax regime. Although the interest you earn is taxable, this tax benefit sets it apart from regular term deposits.

Myth 4: FDs require a large initial investment
Fact: You can book an FD with an amount as low as ₹10,000

The idea that a big initial investment is necessary is a misconception. With IndusInd Bank, you can book an FD with an amount as low as ₹10,000. This. low entry point makes FDs accessible to a larger audience and encourages saving habits. This approach further democratises investing as almost anyone keen on saving money and growing their funds can benefit from fixed deposits.

Myth 5: In case of an emergency, breaking FDs is the only option
Fact: You can get a loan against your FD to access funds immediately

Instead of breaking your FD, it is possible to pledge your FD to secure a loan without losing accrued interest. The amount you can qualify for depends on the bank’s policies, your FD’s total value, and the type of loan you are applying for. Such loans usually have lower interest rates than unsecured loans as your fixed deposit account acts as security. Having collateral often allows borrowers to qualify for more favourable loan terms and conditions. You can also opt for the auto-sweep facility and link your savings account with your fixed deposit.

Ending note

Fixed deposits are a versatile investment tool, but myths can lead to misinformation. It’s important to research and understand the specifics of your investment. FDs offer flexibility, safety, and reasonable returns. Most importantly, they can be a valuable part of a balanced investment portfolio. So, dispel these myths and consider FDs as a low-risk investment option for your financial goals.

You can choose an IndusInd Bank Fixed Deposit for hassle-free, paperless, and instant booking. Enjoy one of the highest fixed deposit rates, an auto-renewal option, multiple frequencies for interest payment, and flexible tenures. To put it simply, your interests always come first.

Book a fixed deposit with IndusInd Bank today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.