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Difference between fixed deposit account and recurring deposit account?
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Difference between Fixed Deposit Account and Recurring Deposit Account
Fixed Deposit Account
A fixed deposit account is a type of savings account where the account holder deposits a lump sum amount for a fixed period of time, usually ranging from one month to five years. The interest rate offered on a fixed deposit account is higher than that offered on a regular savings account, and the interest rate remains constant throughout the tenure of the deposit. The interest earned on a fixed deposit account is taxable and is deducted at source according to the prevailing tax laws.
Recurring Deposit Account
A recurring deposit account is a type of savings account where the account holder deposits a fixed amount of money at regular intervals, usually monthly, for a fixed period of time. The interest rate offered on a recurring deposit account is similar to that offered on a fixed deposit account. The interest earned on a recurring deposit account is taxable and is deducted at source according to the prevailing tax laws.
Key Differences between Fixed Deposit Account and Recurring Deposit Account
- Deposit Amount - The deposit amount in a fixed deposit account is a lump sum amount, whereas the deposit amount in a recurring deposit account is made at regular intervals.
- Deposit Tenure - The deposit tenure in a fixed deposit account is fixed and ranges from one month to five years, whereas the deposit tenure in a recurring deposit account is also fixed but usually ranges from six months to ten years.
- Interest Rate - The interest rate offered on a fixed deposit account is usually higher than that offered on a recurring deposit account.
- Flexibility - A fixed deposit account is less flexible than a recurring deposit account as the deposit amount and tenure cannot be changed once the account is opened. However, a recurring deposit account offers more flexibility as the deposit amount can be changed, and the tenure can be extended or shortened depending on the account holder's needs.
- Withdrawals - Withdrawals from a fixed deposit account before maturity usually attract a penalty, whereas withdrawals from a recurring deposit account before maturity may not attract a penalty, but the interest earned may be lower than that offered on a completed tenure deposit.
Conclusion
Both fixed deposit and recurring deposit accounts are popular savings options offered by banks and financial institutions. The choice between the two depends on the account holder's financial goals, investment horizon, and risk appetite. A fixed deposit account is ideal for those who have a lump sum amount and want to earn a higher interest rate, whereas a recurring deposit account is suitable for those who want to save a fixed amount of money every month and earn a steady return on their investment.
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Difference between fixed deposit account and recurring deposit account?
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Difference between fixed deposit account and recurring deposit account? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Difference between fixed deposit account and recurring deposit account? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Difference between fixed deposit account and recurring deposit account?.
Difference between fixed deposit account and recurring deposit account? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Difference between fixed deposit account and recurring deposit account? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Difference between fixed deposit account and recurring deposit account?.
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