In a world where we look for financial stability, the two terms that have been our guiding lights in saving money are fixed deposit and term deposit. However, both these terms are used interchangeably, but they also differ in some aspects. To find out those basic differences between Term deposit vs fixed deposit, stick to this write-up.
These deposits not only help the account holders but also the banks or other financial institutions, as when any account holder deposits their money in any bank, they receive interest on that, and through that banks lends money to other applicants and makes their profit out of it.
But however, if the account holder withdraws their money back, banks may face problems like less capital, which leads to issues while lending money to other applicants. That’s where these deposits enter into the show, that helps to avoid these kinds of situations.
Before having a comparative analysis between Term deposit vs Fixed deposit, let’s have a little brief about what these deposits actually are.
What is a Term Deposit?
Term deposit which is also known as time deposit. It is an investment option that offers investment with a specific maturity date.
Here, the money is invested for a fixed short period of time at a fixed interest rate. Due to its fixed maturity period for a specific short span of time, it is commonly referred to as its “term”.
Key points of Term deposit:
- Its maturity time span can range from a few weeks to a few years.
- Offers a fixed interest rate.
- Doesn’t provide the option of withdrawing money before maturity span ends.
- In case of larger investments, investors can earn higher interest rates.
What is a fixed Deposit?
Fixed deposit is like buying a reliable vehicle for the long run. Fixed deposit is a type of deposit account provided by banks or financial institutions. In a fixed deposit account, you put or invest a definite amount of money for a fixed definite period of time at a fixed interest rate.
The tenure can be as long as 10 years, depending upon the concerned bank or financial institution and their policies.
Key points of Fixed deposit:
- Investors can withdraw their money before maturity period, but with that a penalty can be imposed.
- Fixed deposit offers a variety of tenure periods, it can be of 8 days to 10 years, that makes it easy for the investor to choose a plan according to their financial preference and requirements.
- Investors can also avail loans against their fixed deposit, it can be marked up to 90% of the principal amount.
- By providing a fixed, guaranteed, and reliable rate of interest, it becomes a safe and secure investment option for the investors.
Now let’s start with the difference between term deposit vs fixed deposit!
|Offers a shorter time span.
|A predetermined fixed
tenure for a longer duration
|Provides high as well as
flexible interest rates.
|Fixed interest rates throughout
the investment period.
|More flexible as compared to
|Less flexibility is provided.
|Penalty on withdrawal
|Here also penalty is imposed
on premature withdrawal.
|Penalty is imposed if money is
withdrawn before maturity period.
|Is more beneficial as it offers
lower interest to their applicants.
|Provides good assured
|Deposit is low, such as recurring
deposit is low.
|Most of the FDs require a
minimum deposit of at
|Type of Investors
|Best for the shorter time
|Best option for longer as
well mid-term time
From the above table of term deposit vs fixed deposit, it can be drawn out that, both these terms differ from each other on some aspects, however, there lies some similarities too.
In case of tenure offered by both the deposit, it can be clearly seen that fixed deposit offers a longer time span for the investment and offers good high interest rates on investment, while in case of term deposit, as discussed above, it offers a shorter time span for the maturity of investment, and along with that it provides high as well as flexible rate of interest.
While talking about the flexibility, fixed deposit offers less flexibility as it requires the amount to be deposited at once, on the other hand term deposit offers more flexibility as compared to fixed deposit, as here investors can invest their money in installments.
Both the deposits require investors to pay a penalty if they withdraw money before the maturity date.
Investors get a good number of assured returns as profit margins in fixed deposit, while on the other hand, term deposit is highly beneficial for investors as it offers a low rate of interest to their applicants.
While considering the minimum deposit aspect, some banks or financial institutions offer minimum investment of at Rs.10,000 in case of fixed deposit. Talking about the term deposit, it requires a minimum investment of Rs.5,000.
Now let’s see what are the ways to open these term deposit vs fixed deposit account !
How to Open a Term Deposit Account?
A term deposit account can be opened through both the ways, i.e. online and offline both.
In offline mode
you need to visit the bank in which you wish to open an account, and after that it requires an application form to be filled out and essential documents required for the verification such as their Permanent Account Number (PAN) card and Aadhaar Card. They might also be required to submit photocopies of the requisite documents.
Opening account through online means
Step 1 – The first and foremost requirement for applying for a term deposit online is to have access to an active net banking feature and a valid PAN card number.
Step 2 – After entering your username and password into the online portal, after that you get access to the list of online services provided by the bank.
Step 3 – After that you can select the option of creating a term deposit account option from the list and enter your details about the account and nominee, if any.
Step 5 – Now decide the amount you want to deposit.
Step 6 – And after that it’ll take time to process the request with accurate details, and after successful verification and process, an account can be created ideally within one to two business days.
How to open a Fixed Deposit Account ?
A fixed deposit account can be opened through both the methods, i.e. online and offline methods.
Opening account through offline method
Step 1 – Fill the application form with relevant and correct details, and enter the amount you wish to deposit with the tenure.
Step 2 – After that submit the form, along with the relevant and required documents.
Step 3 – Either pay the amount in cash or deposit a cheque for that
Step 4 – With all the steps completed till now, the application will then be processed, and an FD account will be opened by the concerned bank or the financial institution.
Opening account through online method net banking
Step 1 – Visit the official website of the bank or financial institution in which you wish to open an account.
Step 2 – Either do a new registration or use the existing credentials.
Step 3 – Then move to the menu section and select the option to ‘Open a fixed deposit account’.
Step 4 – Fill out all the required details, such as the investment amount, tenure, nominee details, etc.
Step 5 – Then review all the details carefully to ensure they are correct and are confirmed to proceed.
Step 6 – Then pay the amount through net banking.
Step 7 – At last download the receipt of payment for future references.
Note: Do you there are different terms that are used by RBI for lending money to commercial banks? To find out more about them, visit our article, Bank Rate vs Repo Rate.
As we conclude this discussion of term deposit vs fixed deposit, it can be stated that both options offer safe and reliable investment options, while they do differ from each other in some aspects.
It is very crucial for investors to have a proper understanding of both the deposits in order to invest their money, and for that they should take proper time and have a proper lookout before choosing between the two.
The choice entirely depends on the investors preferences and requirements, and should pick the best between the two that best aligns with their financial needs.