Sponsored Ad:
Transform your financial life by tracking, planning, and optimizing your budget effortlessly with our user-friendly Google Sheets Budget Planner Template! I Want This Template
A fixed deposit, also known as a time deposit or term deposit, is a financial product offered by banks and financial institutions.
It involves depositing a specific sum of money with a bank for a predetermined period, usually ranging from a few months to several years.
During this period, the deposited amount earns a fixed interest rate that is typically higher than the interest rate offered on regular savings accounts.
The key characteristics of a fixed deposit are:
- Fixed Interest Rate: The interest rate is predetermined and remains constant throughout the deposit’s tenure. This means you know exactly how much interest you will earn.
- Fixed Tenure: You agree to keep your money deposited for a specific period, known as the tenure or term. Withdrawing the funds before the maturity date may result in penalties or a reduced interest rate.
- Safety: Fixed deposits are considered low-risk investments because they are typically backed by the guarantee of the bank, up to a certain limit, such as through deposit insurance.
- Interest Payout: Interest can be paid out at different intervals, such as monthly, quarterly, semi-annually, or at maturity, depending on the terms of the deposit.
- Liquidity: Fixed deposits are less liquid than regular savings accounts, as early withdrawal may result in financial penalties or loss of interest.
Fixed deposits are a popular choice for individuals looking to earn a predictable and steady return on their savings while preserving the principal amount.
They are often used for short-term financial goals or as a safe haven for surplus funds.