Wondering how you can enhance your FD interest rates? Is this even possible? Most people simply settle for the rates that they see at their financial institutions without wondering how to increase their overall inflow from their hard-earned money. Agreed, a fixed deposit is one of the most trusted and time-tested investment avenues for Indian citizens. The returns are fixed and guaranteed, there are no fluctuations on account of market circumstances and interest income is earned steadily on a monthly, quarterly or annual basis.
Yet, you should take a look at some helpful tips for making the most of your Fixed Deposit (FD). This can only be done if you follow some handy tips for earning more interest on the same.
Tips for earning higher FD interest
If you are checking out PNB FD interest rates and rates of interest at other leading banking institutions, make sure that you compare before choosing the final institution for your FD. Here are some useful tips that will help you get more interest in your Fixed Deposit (FD) investments.
- Compounding and its sheer power- You must have already heard of the phrase popularly known as the power of compounding. Compounding basically equates to earning interest upon interest. This means that whenever the bank gives you any interest on your deposit of any type, this is calculated upon the original principal amount of the deposit in question. The second time that this interest is computed, it will take into account the principal along with the first interest. This will be the new principal for computing the second interest and the same procedure will repeat itself for every interest calculation thereafter. Hence, the power of compounding will be adding profit steadily back to the principal if you reinvest the whole amount. This will help you earn a bigger profit and more interest from your FD in the long run. Check the frequency for compounding which may be quarterly, daily, half-yearly, annual or monthly since the main component for earning higher returns from FDs with compounding is the time period or duration. If you are not keen on withdrawing income regularly such as monthly FD interest withdrawals that are made by senior citizens and retirees, you may compare the compounding interest on fixed deposits and frequencies. Choose an FD that will give you the lowest possible compounding interval since the interest is higher if the interval is smaller.
- Apply for your FD online- Some financial institutions like NBFCs and banks have special FD offers and schemes for investors who apply through the online method. These FDs also come with additional interest upon the regular rates for drawing more investors. Look out for such offers from your bank or other leading banks in India. The application procedure is quite easy and you will have lower processing charges to pay as well. Applying online will enable a better comparison process for rates of interest that are given by your competitors and select the best option likewise.
- Flexi-Deposits or Auto-Sweep-In Schemes- These are exclusive deposit based schemes provided by commercial banks in the country which fuse the features of current and savings accounts along with fixed deposits. When you choose the deposit, the balance crossing a particular amount will be transferred automatically to an FD account for default tenures. Later on, whenever you require the money or when your savings bank account has lower funds, the FD will be automatically dissolved and the funds will be shifted to your savings bank account for meeting the deficit. This makes sure that the bank account money will not stay idle and you will keep getting improved returns in comparison to regular savings bank accounts. The biggest convenience here is that you will not have to track any idle funds on a regular basis and will only have to give instructions to your bank for creating term deposits from your savings account. The procedure of money transfer into FDs will take place automatically post giving instructions to your bank for availing of this facility at your end.
- Choose higher interest rates- The best way to increase your earnings from your FD is to choose a lender or financial institution that is offering the highest possible rates of interest. Of course, make sure that the financial institution is reputable. An interest rate of at least 7% or even higher will help you swiftly increase your savings in a stable manner.
- Choose company fixed deposit options- You can take a look at company FDs which are offered by several financial institutions and banks. These company FDs may help you earn slightly higher interest while offering various other advantages as well. Choose a reputed financial institution in this regard while choosing for FDs that help you meet future financial goals without any hassles.
- Start multiple FDs- You may consider starting or investing in multiple fixed deposits for earning higher interest. There are various benefits of investing in multiple FDs. You can gain from varying interest rates while creating a future safety net against the riskier investments in your portfolio. You can also lower your tax obligations with this system while gaining comparatively higher income through making use of varying periods of maturity. This will help you suitably leverage your FD investment amount.
On a closing note
When you are investing in Fixed Deposits (FDs), make sure that you follow some tips for earning comparatively higher interest rates and income as compared to the regular rates. A little strategy and planning on your part will help you accomplish this objective, thereby helping you get better returns, grow your savings exponentially and meet future financial requirements or objectives smoothly without any hassles whatsoever. Consult your financial advisor at the financial institution if you require assistance or guidance setting up your FD.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
So, what do you think ?