Offers
Rates
V-KYC
Debit Card Related
Credit Card Related
SA Welcome Kit 
Manage Mandate(s)
Get Mini Statement
categories
Bloggers
Blog collection
Press ReleaseUnravelling the Differences Between Savings Account and Fixed Deposit
Posted on Monday, May 20th, 2024 | By IndusInd Bank
aving your earnings is significant. One must pay close attention to every aspect of personal finance, such as understanding the different types of accounts and how they help in safeguarding and multiplying the money. Savings accounts and fixed deposit accounts are popular choices for individuals looking to save and grow their money. While both serve the purpose of accumulating funds, they operate differently and cater to varying financial goals.
Difference Between Savings Account and Fixed Deposit Account
Savings Account: This is the most basic type of account but is considered the cornerstone of banking services. As the name suggests, this account offers an individual a secure place to store money along with earning interest. A savings account offers high liquidity by allowing the account holders to deposit and withdraw funds as needed without incurring penalties. As the savings account provides high liquidity, the interest earned is a modest rate between 3% and 6%. Click here to enter text.IndusInd Bank provides up to 6.75% p.a. on your savings account balance.
Fixed Deposit Account: This is designed for individuals seeking higher interest rates by depositing a certain amount for a specified period. Also known as time deposits, the period can range from a few months to several years. Unlike savings accounts, early withdrawal under a fixed deposit account incurs penalties, making it a less flexible option. Click here to enter text.FDs usually offer interest rates between 5% and 8%. The interest rates for an FD at IndusInd Bank can go up to 7.75%
Also Read: Overview of Fixed Deposits
Thus, the difference between fixed deposit and savings accounts can be understood by keeping in mind their salient features
Savings Account vs. Fixed Deposit
| Particulars | Savings Account | Fixed Deposit Account |
| Purpose | To provide a secure place for individuals to store their money while earning a modest interest | To provide higher returns on savings over a fixed period |
| Suitable for | short-term financial goals and emergency funds due to their accessibility and liquidity | Investing surplus funds for a predetermined duration without the need for immediate access to funds. |
| Interest Rates | Savings accounts usually provide lower interest rates. | Fixed Deposit attracts higher interest rates as compared to the savings account. |
| Liquidity | It offers higher liquidity as it allows you to withdraw funds anywhere and anytime | Does not offer much liquidity as funds are locked for a pre-determined period. In case of withdrawal, some portion of interest is forfeited. |
| Risk and Return | Considered as a low-risk investment tool with high liquidity, therefore less returns as compared to fixed deposit | Fixed deposits offer higher returns as the money is locked for a specific time. FD carries minimal risk. |
| Tax Benefit | No tax benefit for keeping money under a savings account | By depositing money in a tax-saving FD, an individual can claim tax deductions of up to INR 1.5 Lakhs according to Section 80C, The Income Tax Act, 1961. |
| Loan | A Loan facility is not available under the savings account | One can fund an emergency loan by keeping the FD receipt as collateral |
| Lock-in period | Savings account has no lock-in period | A fixed deposit account has a lock-in period for which the money is deposited. |
| Benefit to Senior Citizen | Savings accounts provide special benefits for senior citizens | Senior citizens enjoy additional interest rates for depositing money under a fixed deposit account |
| Interest Calculation | Interest is credited periodically, calculated on the average daily balance in the account. | Interest is credited on the agreed-upon terms for the principal amount invested. |
Choosing between an FD and a savings account hinges on one’s financial objectives, risk tolerance, and liquidity needs. By understanding the differences outlined above, you can appropriately decide the perfect account for you as per your financial goals and preferences.
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.
