Tips To Get The Best Fixed Deposit Interest Rates

Fixed deposits (FDs) are one of the most popular investment options in India, offering assured returns and low risk. However, with so many banks and financial institutions offering FDs, it can be challenging to find the best interest rates to maximise your returns. By understanding a few key factors and strategies, you can ensure that your hard-earned money grows at the best possible rate. In this article, we’ll explore some practical tips to help you get the best fixed deposit interest rates and make the most of your investments.

Choosing the Right Tenure for Higher Fixed Deposit Interest Rates

One of the most crucial factors influencing your fixed deposit interest rate is the tenure you choose. Generally, longer tenures offer higher interest rates compared to shorter ones. Here’s how you can leverage this to your advantage:

Longer Tenures, Better Rates

Banks typically offer higher interest rates for longer FD tenures. For instance, a 5-year FD might fetch you an interest rate of 6.5% per annum, while a 1-year FD from the same bank might offer only 5.5%. By opting for longer tenures, you can lock in your funds at a higher rate and enjoy better returns.

Extending by a Day Can Make a Difference

Sometimes, even extending your FD tenure by a single day can bump you up to a higher interest rate slab. For example, if a bank offers 6% interest for FDs maturing in 364 days and 6.5% for 365 days, investing for just one extra day can significantly improve your returns.

Cumulative vs. Non-Cumulative FDs: Which Offers Better Returns?

Another important aspect to consider is whether to opt for a cumulative or non-cumulative fixed deposit. Here’s how they differ:

Cumulative FDs for Compounding Benefits

In a cumulative FD, the interest earned is reinvested with the principal amount, allowing your money to grow through the power of compounding. At maturity, you receive the principal along with the accumulated interest. This option is ideal if you don’t need regular income and want to maximise your returns.

Non-Cumulative FDs for Regular Income

With non-cumulative FDs, the interest is paid out at regular intervals (monthly, quarterly, half-yearly, or annually) instead of being reinvested. This option is suitable if you need a steady income stream from your investments.

Laddering Your FDs for Liquidity and Better Rates

The ladder investment strategy involves dividing your investment into multiple FDs with different maturities. This approach offers several benefits:

Liquidity at Regular Intervals

By laddering your FDs, you ensure that a portion of your investment matures at regular intervals, providing you with liquidity. For instance, if you have ₹5 lakh to invest, you can split it into five FDs of ₹1 lakh each, with maturities of 1, 2, 3, 4, and 5 years. This way, you have an FD maturing every year, giving you access to funds if needed.

Benefiting from Varying Interest Rates

Laddering also allows you to benefit from varying interest rates. If rates rise in the future, your maturing FDs can be reinvested at higher rates. Conversely, if rates fall, you still have some FDs locked in at the previous higher rates.

Avoiding Premature Withdrawals to Optimise Returns

Premature withdrawals from your FD can significantly impact your returns. Here’s why you should avoid them:

Penalties and Reduced Interest Rates
Banks usually charge a penalty for premature FD withdrawals, which can eat into your returns. Additionally, the interest rate may be lowered for the period the FD was held, further reducing your earnings.

Overdraft Facility as an Alternative
If you need funds urgently, consider taking an overdraft against your FD instead of closing it prematurely. Most banks allow you to withdraw up to 90% of your FD amount as an overdraft, ensuring that your FD continues to earn interest at the original rate.

Submitting Form 15G/15H to Save on TDS
If your total income is below the taxable limit, you can avoid tax deduction at source (TDS) on your FD interest by submitting Form 15G (for individuals below 60 years) or Form 15H (for senior citizens). This ensures that you receive the full interest amount without any deductions.

Investing in Senior Citizens’ Names for Higher Rates
If you have senior citizen parents or grandparents, consider investing in FDs in their names to earn higher interest rates. Most banks offer an additional 0.25% to 0.75% interest for senior citizens. Moreover, seniors can save on taxes by submitting Form 15H if their total income is below the taxable limit.

Comparing Interest Rates Across Banks
Different banks offer varying fixed deposit interest rates, so it’s essential to compare and choose the best option. Here’s an example of FD interest rates across major banks:

As you can see, Airtel Finance offers competitive FD interest rates compared to other major banks. By choosing the right provider, you can maximise your returns.

Using an FD Interest Calculator
To get a clear picture of your expected returns, use an online FD interest calculator. Simply enter the investment amount, tenure, and interest rate to see the maturity amount and interest earned. This tool helps you compare different investment options and make informed decisions.

Conclusion:

By following these tips and strategies, you can ensure that you get the best fixed deposit interest rates and maximise your returns. Remember to choose the right tenure, consider cumulative FDs for compounding benefits, ladder your investments for liquidity, avoid premature withdrawals, submit Form 15G/15H to save on taxes, and compare interest rates across banks.

Airtel Finance offers attractive FD interest rates, along with the convenience of investing from the comfort of your home. With their user-friendly online portal, you can easily open an FD, manage your investments, and access your funds when needed. Start your investment journey with Airtel Finance today and watch your money grow steadily over time.

FAQs:

1. How to get the highest interest on FD?
   To get the highest interest on FD, choose longer tenures, invest in senior citizens’ names, opt for cumulative FDs, and compare rates across banks.

    

2. How to maximize fixed deposits?
   Maximize your fixed deposits by laddering your investments, avoiding premature withdrawals, submitting Form 15G/15H to save on taxes, and using an FD interest calculator to compare options.

    

3. How do I get high returns on FD?
   To get high returns on FD, select the right tenure, consider cumulative FDs for compounding benefits, invest in senior citizens’ names, and choose a bank offering competitive interest rates.

    

4. How to get the maximum profit from a fixed deposit?
   Maximize your fixed deposit profits by opting for longer tenures, investing in cumulative FDs, laddering your investments, avoiding premature withdrawals, and comparing interest rates across banks to find the best option.