What is a Fixed Deposit Bank Account and How it Works

What is a Fixed Deposit Bank Account and How it Works?

Securing future and protecting themselves from financial loss can only be possible with some smart investments. These smart future investment ideas need to be executed by the source of investments. And one of the main source of investment with fixed interest rates and higher return is fixed deposits. The fixed deposits are one of the ideas for a safe investment plan with fixed interest rates. In this type of investment, the investors shouldn’t worry about the risk because there is no risk in this form of investments.

What is a Fixed Deposit?

Fixed deposits are one of the safest form of investment. In this form of investment a person holding a savings bank account in a financial institutions, government and private banks can keep a lump sum of amount in a fixed deposit. And on that fixed amount there will be a certain percentage of interest rates are levied. And this levied charges will be added to the principal amount deposited. Moreover, the final amount will be withdrawn only at the time of maturity. Which is at the end of the fixed period of time.

 How Fixed Deposit Bank Accounts work?

As a matter of fact the rules and regulations are levied on a fixed deposit accounts are based on the government orders. Therefore, all the procedures involved in this fixed deposits are liable under the act of government policies.

1) All deposits will be liable for a certain percentage of interest

When it comes to fixed deposits, it is termed as an investment because of the added interest. The added interest will be based on the term of the fixed deposit account. A person investing or assuring a fixed lump sum amount needs to be aware of the fixed rate of interest levied on the principal deposits.

Also Read : What is a Recurring Deposit ?

2) Interest levied on the basis of the tenure

All fixed deposit accounts are calculated with a rate of interest added to the account, on the basis of the entire work structure of the fixed deposit account. Therefore, if a person invested fixed deposit for 3 months, then the rate of interest will be levied on the amount for an interest rate supporting 3 months.

3) The fixed deposit amount cannot be withdrawn before the maturity period

A person investing in a fixed deposit needs to plan their deposit tenure clearly. And that is because if the person decides to withdraw the amount, it is not possible to withdraw any kind of money from the account. Therefore, a person need to keep it for a period of time, which can be feasible for them.

4) Penalty charges will be added for breaking the account in advance

It is not easy to break a fixed deposit account well in advance. And if it is broken, then some part of the penalty will be charged at the time of withdraw. These percentages of penalty will be charged at principal fixed deposit.

5) Assured value of return

As mentioned several times that fixed deposit accounts are a risk free source of investment. This risk free zone creates an assured rate of return at the end of the completion period. Therefore, a person investing in a fixed deposit will be gaining an assured return at the end.

6) Supports savings and safeguards the deposit for a period of time

One of the major positive points of fixed deposit account is that it can be kept for a period of time without any debit. It encourages people to deposit their money as a fixed deposit as it safeguards that amount from unnecessary spending.

At the end, these fixed deposit accounts are a risk free source of investments.  And some of the points mentioned above regarding fixed deposits can be beneficial for future investment purposes.

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