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Recurring Deposits: Consider the Advantages and Benefits

sanna atkinson August 18, 2021

What is a Recurring Deposit? 

It is one of the oldest investment options, followed by the financial sector that starts to bloom. A systematic investment plan of mutual funds and stocks that have started a recurring deposit is also considered the best investment option. 

With the help of a recurring deposit account, you can save regularly with an attractive interest rate and assured returns. It is designed in a manner where you can save little money over time. A recurring deposit is an advanced version of a fixed deposit. 

When you compare fixed deposits, the recurring deposits tend to understand that it is challenging to save lots of money together. However, you can easily save bit by bit and get the amount as interest for your outstanding balance.

Here are the top reasons why you should invest in a recurring deposit account:

High-Interest Rate: One of the best benefits is a recurring deposit account with an attractive interest rate. It is generally higher than the savings interest account rate. The payout will be made at the maturity of the recurring deposit with quarterly compounding. The recurring deposit is available only for domestic and senior citizens from most banks. 

No penalty if you miss a month: One of the best advantages of a recurring deposit is that you do not have to worry about missing your payments. No more monetary fine if you aren’t able to make your payments due to undeniable circumstances. It is customer-friendly. Financial institutions such as Shriram transport finance bank has no penalty if you even miss a month. 

However, always remember in case of premature withdrawals before 30 days, there is no interest payable—premature withdrawals for a recurring deposit account after 30 days and before six months. The interest you receive will be a fixed deposit card rate applicable for 30 to 45 days.

Start with a minimum of Rs.2000/Month: It is unnecessary for you to think you have to save a lot of money each month to get a recurring deposit account. One of the main advantages of a recurring deposit account is that you can quickly start with a minimum of ₹2000 per month. On the brighter side, you can attain a maximum monthly investment for recurring deposits upto 75,000.

Save for as low as six months: There are many investment products you need to commit to in a fixed period. This process usually takes 12-24 months. One of the benefits of having a recurring deposit account is that the commitment period is much lower. For instance, Usually, bank permits you to be safe for as low as six months. 

Simple documentation: To open a recurring deposit account, the documents required are difficult to arrange. All the resident individuals can open a recurring deposit with a linked savings account. However, once the savings account is opened, there is no need for further documentation. It is the most straightforward and hassle-free method to save money and to create wealth without any guarantee.      

Best for short-term goals:  Investing in a recurring deposit is the best suited for all types when it comes to short-term goals. In short-term goals, you have 1 to 3 years to achieve them. However, a recurring deposit must be utilised to save your yearly educational expenses for your children, furnishing, saving for a dream overseas vacation and marriage expenses. 

Save bit by bit: One of the best parts of a recurring account deposit is that it understands not all have the money to deposit. Although, in a fixed deposit, you have to deposit all the money at one stretch. A recurring deposit account allows you to save small accounts regularly and also gains attractive interest rates. 

Ideal for beginners: If you are new to investment, this is the best option. Your initial financial goals are tough enough to make out. However, this learning phase with a recurring account can help you understand the investment patterns better and invest in the future. You will also create a list of resources that will help you later on with your investment plans. 

Easy to open: It is effortless to open a recurring deposit account. You can quickly invest in a recurring deposit account, start investing as much as possible each month, and enjoy its benefits. Of course, you should maintain a constant practice of saving the amount to ensure better savings.

No TDS: Just like a fixed deposit, there is no TDS deduction for a recurring deposit account until your interest rate grows above Rs.10,000 per year. Depending upon your tax slab, you can also easily file your returns if they are taxed. 

Conclusion: 

Recurring deposit account gives higher interest rate, flexible tenure, and good return on your investment amount regarding recurring deposit investment. Depending upon your financial goals, you can easily choose the recurring deposit criteria to suit you best. In addition, you can use a recurring deposit calculator to find out the maturity amount before starting your investment.

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