Everybody looks for a secure and good return on their hard-earned money to meet their future goals. Many investment options are available in the market, but they need extra consideration while choosing any of them, as it's not only a matter of growing money but also keeping it secure to utilize in emergencies or urgent requirements. Only our invested money becomes support when we are in urgent need, and nobody is available to help us. FDs and RDs are one of the safest ways to grow money without worrying about security and other threats. FDs are lump-sum investments, whereas RDs are for regular contributions; both are comparatively low-risk investments. Since they are good investments, people often get confused about FD vs RD, which one to choose? Differences mentioned below will help you choose the right option based on your future requirements and investment habits. Read the article further to know more about both.
FD (Fixed Deposits)
FDs (fixed deposits) are one of the safest and secure options for investing money to meet future needs. They provide an assured return over a period ranging from 7 days to 10 years by banks and 5 years by NBFCs. Investors can avail of a loan against their FD up to 90% of their FD value if required. It provides the convenience of reinvestment as per the investors' wish. Also, some of the banks give interest on the invested amount, which can be monthly, quarterly, or yearly, which helps people meet their regular needs.
RD (Recurring Deposits)
RD (Recurring Deposits) is also a good and safe investment option where the investor invests small, regular amounts monthly. It is one of those investment options that suits all classes to build savings without a large upfront investment. It ranges from 6 months to 10 years. It offers total deposits plus interest earned at the time of maturity. Investors can invest their money in RD through any banks or NBFCs.
Key Differences Between FD vs RD
FD vs RD: Investment Mode
Investment mode refers to the specific way investors choose to allocate their money with the expectation of achieving investment goals. RDs are ideal for steady income and disciplined savings, as they start from a monthly contribution of Rs. 500, whereas FDs require a lump-sum investment. In short, RD's investment mode is more flexible and customer-friendly than FDs.
FD vs RD: Investment Frequency
Investment frequency refers to how often investors need to make investments, as it impacts the cash flow management and flexibility to invest. It could be one time, quarterly, or yearly, based on the investor's convenience. FDs are a one-time investment, while RDs are required to make monthly deposits throughout the tenure, which is often considered good for lower-salaried people, as they can’t invest more money at a time.
FD vs RD: Interest Calculation
Interest calculation is an important consideration as it determines the total return on investment at the end of the tenure. Calculating and comparing it with different investment options provides the insight to choose the best one. FDs calculate interest on the entire amount paid from the start, whereas RDs calculate interest on the growing balance as each monthly deposit is added.
FD vs RD: Interest Payout
Interest payouts are important as they provide a steady stream of income, which enhances the liquidity that can be used for regular needs or reinvested to potentially grow savings faster. FDs' interest payout is generally considered better than RDs as they offer interest periodically, which can be monthly, quarterly, or yearly. Whereas RDs pay interest once after the compilation of tenure, and have no periodic interest payment option available.
FD vs RD: Renewal Instruction
Renewal Instructions are necessary to maintain continuity, ensure compliance, optimize benefits related to any financial investments, and prevent service interruption. FDs are more flexible with renewal as they offer reinvesting the principal or principal + interest amount. RDs don’t have such facilities as investors can’t reinvest the principal amount, but can convert their matured money into FDs.
FD vs RD: Investors' Preference
Both FD and RD are safe and relatively low-risk investments that can be chosen for future goals. Investors can choose either FD or RD as per their requirements, as FDs are for lump sum investment, while RDs are for regular contribution. FDs are the most chosen investment option due to higher returns compared to RDs, as its amount is deposited once and is a lump sum that earns comparatively higher interest.
Conclusion
FDs and RDs are comparatively more secure investment options for different financial needs. It offers a good return over a while without worrying about security, as it is managed by reputed banks and NBFCs, which have been working for years to help investors grow their hard-earned money. Both FDs and RDs are better for investment, provide a return, and offer convenience in some way or another. FDs are best for those who can make a lump-sum payment without affecting their pocket. Whereas RDs are best for lower-income individuals and for those who prefer a monthly investment rather than a one-time payment. We have tried our best to help you know the key difference between FD and RD to make an informed financial decision to achieve your financial goals.