Fixed deposits are the most popular form of saving money. These deposits are also called term deposits that give the investor a fixed rate of interest until the tenure matures. They serve a dual purpose of saving as well as earning money. The interest rate offered on FDs is relatively higher than other saving options. Given below are the few advantages of fixed deposit account.

Guaranteed Returns
Investing in fixed deposits assures guaranteed returns. The interest rate offered on them varies from 4.50% p.a. to 8% p.a. depending on the tenure and the bank that you have chosen. The interest earned over the period of time is added to the principle amount.

Flexible payment
FDs give you the flexibility to choose how you wish to receive the interest. It can be paid annually, monthly or during maturity.

No maximum cap
Generally, there is no maximum amount for fixed deposits. However, some banks may offer it.

Helps during crisis
Fixed deposits are of great help in times of financial crisis. A lot of banks also allow you to take loans against Fixed Deposits. Some banks let you partially withdraw the amount of FDs, though they may levy some charges on it.

Easy to withdraw
You have the freedom to withdraw entire amount deposited in your FD account at any time.

Type of Fixed Deposits
Normal Fixed deposits :–
You can lock a certain amount of money for a fixed period of time and avail higher rates of interest.

Tax Saving Fixed deposits :–
These FDs has a lock-in period of 5 years and tax exemption can be availed on the deposit of upto 1.5 lakh annually.

Senior Citizens Fixed deposits :–
People over the age of 60 years can avail this scheme. It has flexible tenures and special rates of interest.

Other types of deposits are –
Cumulative FDs, Non-Cumulative FDs and Flexi FDs.