FD Interest Rates 2020755 views
- What are the different Fixed Deposit Interest Payout Frequency and how can you close your Fixed Deposit?
- Know about how to use the Fixed Deposit Calculator to know your interest and maturity amounts!
There are individuals who like to have guaranteed returns on the investments made by them. For such purpose, Fixed Deposit (FD) is one investment option that is quite popular amongst Indians. Also known as Term Deposits, Fixed Deposits not only help you in saving your money by depositing securely in the bank but also helps in getting you lucrative returns on your deposits. The return on your deposit depends on the interest rate provided by the lender, tenure chosen by you, and the deposit amount. The best part is that your fixed deposit amount and interest on it will remain fixed during your tenure even if there are fluctuations in the market. Also, your fixed deposits provide you the required liquidity at emergency times.
The tenure of a fixed deposit generally ranges from as short as 7 days to as long as 10 years. You can choose the tenure according to your convenience. And as we told the interest will be dependent on the chosen tenure. Different individuals want the interest payout at different frequencies that are monthly, quarterly, half-yearly and yearly. In this article, we will tell you about all these interest payout frequencies in detail so that you can choose the suitable frequency for you. Apart from this, we will also tell you about the maturity instruction related to the Fixed Deposits. So, if you want to gain more knowledge about it, keep reading!
Table of Contents
- 1 What are the Different Frequencies of the Interest Payout on Fixed Deposits?
- 2 What is the Method of Fixed Deposit Interest Calculation?
- 3 Maturity Instructions on Fixed Deposits
- 4 Fixed Deposit Closure On Maturity
- 5 Fixed Deposit Closure before Maturity
What are the Different Frequencies of the Interest Payout on Fixed Deposits?
Any individual who opens a fixed deposit in a bank or a financial institution gets interest on the deposit amount. But the individual can choose at which frequency he or she wants the interest payout. We are providing the details about all the interest payout frequencies below which you can look at!
Monthly Interest Payout
In this type of interest payout frequency, as the name suggests, you will get the interest amount on your FD amount per month. This is suitable for individuals who want to have a fixed return from their deposit amount. The interest will be like the monthly income for you. The interest calculation will be via the Simple Interest method.
Quarterly Interest Payout
The interest amount given to you by the lender on this scheme will be on a quarterly basis which simply means you will get the interest every three months during your overall FD tenure.
Half Yearly Interest Payout
This is the other interest payout frequency option that you can choose while depositing your fixed amount. In this type, you will get the interest on your deposit amount every six months during your FD tenure. Suppose you are depositing a fixed amount for a period of 5 years, you will get the interest amount 9 times during this period. For any FD amount with tenure of 6 months and above, the interest will be calculated on a quarterly basis which means the interest earned on the previous quarter will be added to the principal for overall interest calculation.
Yearly Interest Payout
This is the fourth and last interest payout frequency option with which you will get the interest on your FD once in a year. The interest amount will be calculated on a quarterly basis here too as the tenure is more than 6 months.
So, these are the interest payout options you can choose while depositing the amount to any lender. It is important that you choose any according to your convenience and requirement.
What is the Method of Fixed Deposit Interest Calculation?
Now that you know about the frequency of fixed deposit interest payout applicable to your fixed deposit, you should know the method by which the interest is calculated. There are two things that affect your overall returns are the interest rates on FD and the frequency of interest payouts. Fixed Deposit interest rates are compounded periodically and you can choose the frequency by yourself. Every individual who is opening a fixed deposit amount wants to know the interest amount and overall return amount he/she can get. To know how the calculation is done, glance at the below formulae.
A = P (1 + r/4/100) ^ (4*n) and
A = P (1 + r/25)4n
A is the Maturity Amount that you will get
P is the Principal Amount or Deposited Amount
R is the Rate of Interest on your FD
N is the Compounded Interest Payout Frequency
You can also get the total fixed deposit interest amount by subtracting the Maturity amount from the principal amount.
There is another easy method by which you can have an estimate about the returns that you will get before depositing the amount. This method is the Fixed Deposit Calculator. To use this calculator, you will only need to fill in a few basic details and you will get the overall maturity value and the interest amount. These details are mentioned below. Do check them!
- Type of Customer ( Normal or Senior Citizen)
- Type of Fixed Deposit
- Frequency of the Interest Payout
- Date of Fixed Deposit
- Deposit Amount
- Tenure of the FD
As soon as you put all these details into the calculator, you will get the total amount as maturity value as well as the Total Interest amount on FD. You need to remember this thing that a higher deposit amount for a long tenure will help you in getting higher returns. Also, choose the lender with higher fixed deposit interest rates so that you can get a higher interest amount.
Maturity Instructions on Fixed Deposits
When you open a fixed deposit at any bank, there is a fixed time by which your FD will mature. You must know this fact that any fixed deposit can be continued till its maturity or it can be continued even after its maturity date via reinvesting your amount or you can even surrender your FD before the maturity date. We will be telling you about all the maturity instructions related to fixed deposits. These maturity instructions may vary from one lender to another. If you want to know more about it, take a look below.
Fixed Deposit Closure On Maturity
If your FD is matured, you can get the maturity amount via two methods – Online and Offline. If you have opened your FD at the branch, you will need to surrender the Fixed Deposit certificate which must have the signature of all the holders if there are more than one. As soon as you submit the certificate, the maturity amount will be transferred to your savings account. In case you have opened your deposit online, this process can be done online and the maturity amount will be credited to your account. In case you don’t notify the bank regarding the maturity of your deposit, the lender can do these two things.
Auto-Renew – The lender can restore your fixed deposit for one year or for the original tenure of your FD. The fixed deposit interest rates will be the same as before.
Auto-Liquidation – Your Fixed Deposit will automatically be liquidated and transferred into your savings bank account on the maturity date.
Your deposit certificate will have all the conditions related to what a lender will do in case you will not submit the certificate before or after the due date.
Fixed Deposit Closure before Maturity
You can also withdraw your fixed deposit amount before its maturity date. But you must know that this can affect your interest rate and you also may have to pay some penalty for doing this. For example, if you decide to close your FD before your tenure, the interest rates will be applicable for the tenure your deposit was with the Bank. Suppose you have an original tenure of 10 years and you want to close your FD in the fifth year, the interest rates will be applicable for 5 years only. Other than this, you will also have to pay penalty charges for this. But the penalty will come in the form of an interest penalty. If we stick to this case, the premature withdrawal here will come with an interest rate couple of percentage lower than what must have been the case for a 5-year deposit of the said amount.
Other than this, individuals can also close their fixed deposits before maturity in case of any personal needs or even you can reinvest the closed fixed deposit amount at a higher interest amount. If you are getting a higher interest on the reinvested amount, it could be a wise decision for you. For this facility, you will need to fill a form with the bank. The two methods for early closure are as follows.
If you decide to deposit the partial amount after the early closure, the interest rates will be on the remaining amount of your fixed deposit. The tenure will be the same as before.
Full Closure and Reinvestment
If you are closing your fixed deposit before the original tenure because of the high interest rates on the reinvestment deposit amount. The interest rates for the deposit will apply for the tenure for which the deposit was with the bank. Suppose you are closing your deposit after four years which was originally for 10 years, the interest will be paid for this 4 years only.