Difference Between Fixed Deposit & Term Deposit

Posted on Monday, January 27th, 2025 | By IndusInd Bank

It is important to understand the variety of investment options available when planning your finances. This ensures effective money management. Two common investment terms you will encounter are ‘Fixed Deposit’ (FD) and ‘Term Deposit’. While these terms are often used interchangeably, they have subtle differences depending on both the investor and the financial institution.

In this article, we will delve into these differences between these terms and help you navigate to an optimal investment decision for you.

Defining Fixed Deposit and Term Deposit

To understand the difference between FD and term deposit, you need to understand the definitions of each of them.

Fixed Deposit (FD)

A Fixed Deposit is provided by banks as a lump sum investment tool. They tend to offer a higher rate of interest on your money compared to a regular savings account. You have to deposit a lump sum of money for a fixed period.  This tenure can range from a few months to several years. The interest rate is predetermined and remains constant throughout the tenure of the deposit. Upon maturity, the depositor receives the principal amount along with the accumulated interest.

Term Deposit

The term ‘Term Deposit’ is often used interchangeably with Fixed Deposit, as it also involves depositing money for a fixed tenure at a predetermined interest rate. However, in some contexts, term deposits may refer to a broader category that includes both fixed deposits and other recurring deposits (RD). An RD is similar to an FD with the exception that you can invest your money periodically instead of a lump sum.

In essence, a fixed deposit is a type of term deposit. However, not all term deposits are fixed deposits. The key distinction lies in the specific terms and conditions associated with the deposit, which can vary from one financial institution to another.

Key Features and Benefits

When you compare term deposits vs. fixed deposits, you will find they offer a similar range of benefits:

1. Security: Both types of deposits are considered low-risk investments, offering a safe haven for your savings.
2. Guaranteed Returns: The interest rate is fixed, providing a predictable return on investment.
3. Flexible Tenures: You can choose the tenure that suits your financial goals, whether short-term or long-term.
4. Loan Against Deposit: Most banks offer loans against fixed or term deposits, allowing you to access funds without breaking the deposit. This is one of the relatively lesser-known benefits of fixed deposits.

Choosing the Right Deposit: What to Consider

When deciding between a fixed deposit and other types of term deposits, consider the following factors:

• Interest Rates: Compare the interest rates offered by different banks on both types of deposits. Higher rates can significantly increase your returns, especially over longer periods.

• Tenure Flexibility: Ensure that the bank offers a range of tenures that align with your financial goals. You can use an FD calculator to check what investment amount and tenure suits you best.

• Premature Withdrawal Options: Check the terms for early withdrawal. Some deposits may charge a penalty for premature access to funds.

• Reinvestment Options: Some banks offer the option to reinvest the interest earned, which can compound your returns over time.

IndusInd Bank’s Fixed Deposit: A Reliable Choice

IndusInd Bank offers a highly competitive Fixed Deposit product that can the right choice for you. Here are a few reasons why:

1. Attractive Interest Rates:

IndusInd Bank provides competitive interest rates that start from 7.75% p.a. Please note that interest rates are subject to change. Click here to see updated rates.

2. Flexible Tenure Options:

With tenures ranging from 7 days to 10 years, you can align your investments with your financial plans, whether short-term or long-term.

3. Instant Online Booking:

Managing your Fixed Deposit is hassle-free with IndusInd Bank’s robust online banking platform, allowing you to open, renew, and monitor your deposits from the comfort of your home.

4. Tax Saver FD:

IndusInd Bank offers a Tax Saver Fixed Deposit, which provides tax benefits under Section 80C of the Income Tax Act if you book it for 5 years.

Also Read: Risk and Returns: A Comparative Analysis of FDs and RDs

Conclusion

Understanding the difference between Fixed Deposits and Term Deposits is crucial for making informed investment decisions. While both options provide security and guaranteed returns, the choice ultimately depends on your financial goals and the specific features offered by the bank.

IndusInd Bank’s Fixed Deposit is a standout option, combining attractive interest rates with flexibility and ease of access. Whether you are planning for a major expense, saving for retirement, or looking to grow your wealth, IndusInd Bank’s Fixed Deposit can be a strategic component of your financial portfolio. By choosing a reliable institution like IndusInd Bank, you ensure that your savings are not only secure but also optimized for growth, making it easier to achieve your financial aspirations.

Start a Fixed Deposit with IndusInd Bank today!

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your 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 making any financial decisions based on the contents and information.