Investing your money is the best option to go to rather than saving it. Saving your funds won’t earn you more returns whereas investing it can. Many people go for investing their surplus fund which they have earned from business profits or from a salary hike. Some people also invest their pensions. Investing always benefits you by replicating your funds.
Now there are many places where you can invest: mutual funds, the stock market, fixed deposits, etc. Investing in a fixed deposit is considered a much safer option compared to others. Investing in mutual funds and stock market involve higher risk as they are depended on market rates. Investing in these high-risk investments can benefit you by incurring higher returns.
The interest on fixed deposits are likely to unchanged as it remains constant throughout the year. Fixed deposit interest rates don’t depend on the market conditions and so they are considered as a safe option for investment. As the market rate keeps on fluctuating it’s possible you may face loss if the market falls down which would not be the case if you are investing in a fixed deposit.
Interest is the most important part when it comes to investing as it helps you to earn higher returns on your FD investment. Now different banks offer a different rate of interest on fixed deposits. Some banks offer high-interest rates whereas some offer low-interest rate. Interest rates also depend upon the amount you have invested plus the tenure of your investment. Depending upon these your interest rate can vary.
These profits or returns that you earn on your fixed deposit will only be useful when you can use them in case of financial emergency. Now emergency can knock your door anytime. You may need funds for a medical emergency or any other emergency and at such time you would run to your fixed deposit account.
Now it’s important for you to know that fixed deposit restricts you from withdrawing funds. And in such a case you might have to break your fixed deposit account. If the financial emergency is a small one you can simply go for borrowing funds from your relatives and friends but in the case of a huge financial emergency, you may have to use your fixed deposits.
Especially in a medical emergency, you have to go for breaking your fixed deposits as the medical expenses these days have touched the sky. But breaking your fixed deposit may cost you. When you break your fixed deposit you have to pay bank a penalty amount as well as the interest rates that you would pay in future would be cut down by some percent.
But there is also one more option than breaking your fixed deposit account. Banks offer you overdraft facility. Under an overdraft facility, you can draw a cheque of 90% of the amount in your fixed deposit account. By taking an overdraft facility you have to pay an interest which is above 100 basis points.
For example, you have a fixed deposit of INR 1 lakh for a period of 3 years having an interest rate of about 9% and you have written a cheque of INR 10,000 for a period of 10 days. You need to repay the amount on the 10th day along with the interest. And this will not affect your interest rate on your fixed deposit account in future.
An overdraft facility can definitely save your fixed deposit account from breaking as well as it can save you from extra charges which you have to pay in case you break your fixed deposit.