We must make a choice while investing money that could aid us in reaching our financial objectives. A recurring deposit (RD) may be one of your greatest bets if you want to generate significant returns without investing a sizable quantity all at once. It is secure and guarantees returns that are sufficient to help you reach your immediate financial objectives.
A term deposit known as an RD enables you to make monthly instalments and receive respectable returns without taking any risks. In order to open an RD account, you must speak with a bank. But it’s important to know how to maximise your investment. Here are some suggestions for maximising the use of your Recurring Deposit (RD) account.
- Pick the appropriate bank.
After you sign up for a recurring deposit plan, the agreed-upon sum will be taken out of your savings account and put into your RD account each month. Choose a bank that offers hassle-free services if you want to avoid problems.
Consider comparing the bank’s interest rates and the recurring deposit account’s other terms and conditions. Various banks provide different interest rates. Choose a bank based on how competitive its rates are for your RD. Depending on the bank, the RD rates presently range from 5.5 to 7.5%.
- Ensure that your tenure is consistent with your objectives.
The lowest and maximum tenures that banks normally offer are six and twelve months, respectively. With your financial aim in mind, you must carefully choose the tenure. You can select that tenure, for instance, if you have 12 months to pay the child’s tuition. You will be able to obtain the results required to fulfil a certain purpose by selecting the appropriate duration and quantity.
- Pick your RD amount carefully.
You should be aware that a certain amount would be withdrawn each month before opening an RD account. The deduction will continue every month until the end of your RD term. Selecting the incorrect amount could result in financial hardship for you. Invest the amount that will allow you to contribute to your RD on a regular basis without compromising your ability to pay for other essential costs.
Recurring Deposits provide guaranteed, liquid returns and may be the best option to finance short-term goals that last one to three years, according to Adhil Shetty, CEO of BankBazaar.com. You can utilise this investment to pay for expenses like home improvement, a child’s wedding or education, travel, and other things. An RD offers returns that are comparable to those of fixed-term deposits (FDs). But unlike FDs, recurring deposits don’t need a one-time deposit. The deposit sum is debited from the bank account to which the RD is linked once you open an RD in a denomination that your bank permits. You will receive the maturity amount, which includes the deposit and interest, at the conclusion of the term.
- Keep away from abrupt withdrawal
You must keep your funds in a recurring deposit account until they reach maturity. You must refrain from prematurely withdrawing your deposits from an RD account unless there is an emergency or financial strain. Withdrawals made too soon may incur fees. Calculate your returns and then match them to your objectives.
- Adaptable Recurring Deposit
Flexi recurring deposits are an option offered by several banks. This option is available if you want to increase the amount of your recurring deposit each month in order to reach a bigger amount at maturity. To avoid jeopardising your other assets, you should only choose this choice if you have extra money each month that you can add to.
- Credit Facility
A lending facility is included with your RD. You may borrow money against the 80–90% value of your RD. However, it is best to employ this alternative only in extreme financial need.
- Choice of Nomination
Always double check to see if you’ve added a nomination to your RD. Your nominee will get the funds in the event of your passing. To protect your investment, this is crucial.
