Why is FD better than Savings Account?


By Anupama Deshpande | Mar 04, 2019

Savings Account is the most popular type of bank accounts. Savings Account is opened not only for saving of your amount but getting interest on it also. You have the flexibility of deposit your fund to or withdraw your fund from the account based on your requirement.

Banks issue an ATM card or Debit Card to the Savings Account Holders. It is generally opened by salaried individuals.

Why is FD better than Savings Account?

Fixed Deposit Account is an account in which a fixed sum of money is deposited for a specified time usually for a period ranging from 7 days to 10 years. A higher interest rate is offered on fixed deposits which varies from bank to bank according to the amount deposited and duration of investment.

Suggested reading 5 Smart Ways to get Cheap Personal Loan

Loan and overdraft against FD are available to FD account holders. You can prematurely withdraw the amount deposited in FD.

There are following reasons supporting why is FD better than Savings Account:

FD Offers Much Higher Rate of Interest

In a savings account, maximum numbers of banks offer interest between 3.5% and 4%. Some of the banks offer more but in case of FDs you will get considerably more interest on your deposits which may range from 6% to 9.5% depending upon tenure for which you deposit your money and on bank as well.

Suggested Reading Top 3 Reasons for Rejection of Personal Loan

FD Can be Used as an Investment Avenue to Achieve Long Term Financial Goal

Through bank FD, you can think of achieving your long term financial goal. The reasons behind it are, first it offer better interest and if you reinvest the amount for long time then it will help you achieve your financial goals. Secondly, it provides fixed rate of interest.

Loan and overdraft against FD is available

Whenever you have urgent need of money, you are free to avail loan or overdraft against your FD. In this way, there is no need to withdraw from your FD prematurely and bear financial loss.

Availability of Tax Rebate u/s 80C of Income Tax Act

Tax rebate u/s 80C of Income Tax Act is also available, if you invest in an FD at least for 5 years or more. This rebate is available upto Rs 1.50 lakhs per financial year at present.

Suggested reading What Factors do the Lenders Check before Extending Personal Loans?

Helps in building Credit History

If you do not have any credit history then your FD can help you building credit history. For this purpose, you can avail a loan like personal loan for short term against your FD and repay it properly.

Helps in negotiating on Loan Interest Rates

If you have an FD with any bank and you are thinking of availing loan from that particular bank, then your FD will help you negotiating with your banker on the interest rate as you are an existing customer of that bank and banks usually offer better interest on loan to their existing customers.

Higher Interest for Senior Citizens

Banks offer more returns to their senior citizen clients. Senior Citizens get at least 0.50% to 1% more interest on bank FDs than that provided to non-senior citizen customers.

Share This :
About Anupama Deshpande
Anupama is a Co-Founder of CodeForBanks.com. She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for CodeForBanks.com & important resource to all those around her.