Fixed deposits or FDs are a popular investment option in India, which offers a guaranteed return to investors. It is considered to be a low-risk investment scheme and is known for providing a safe investment avenue for those who are risk-averse. However, with the advent of technology, an online FD is gaining momentum. So, which one is better? An online fixed deposit or a traditional one? This article aims to compare the two and help you decide which one is better for you.
Traditional FDs- The Old School Way
Traditional FDs have been around for a long time, and for many investors, it is the preferred choice. Banks in India offer traditional FDs where you deposit a fixed sum of money for a specified period, and in return, they offer an interest rate. The interest rate is fixed at the time of investment and remains the same until maturity. The investor can choose to invest in an FD for a tenure ranging from 7 days to 10 years.
The interest rates offered for traditional FDs are relatively lower than online fixed deposits. The highest fd interest rates in India range from 5.30% to 6.25% p.a., depending on the bank and tenure. For instance, if you invest INR 1 lakh in a traditional FD for a tenure of 1 year at an interest rate of 5.5% p.a., you will receive INR 55,000 at maturity.
Online Fixed Deposits- The New Kid on the Block
Online fixed deposits offer an interest rate that is higher than traditional FDs. The highest fd interest rates in India for online fixed deposits range from 6.50% to 7.50% p.a. depending on the bank and tenure. For instance, if you invest INR 1 lakh in an online FD for a tenure of 1 year at an interest rate of 7.0% p.a., you will receive INR 57,000 at maturity.
An online fixed deposit is a relatively new concept in India, where investors can invest money in an FD through the bank’s website or banking app. Online FDs have gained traction, primarily because they offer higher returns than traditional FDs. They are also more convenient since investors don’t have to visit a bank branch to open an FD account.
Note: Above one is the approx. amount, do you research before investing.
Comparing Traditional FDs and Online Fixed Deposits
Here is a comparison of the two investment options based on various parameters.
As stated earlier, the interest rates offered on online fixed deposits are higher than traditional FDs. This is primarily because banks incur lower operational costs when an investor opens an FD online. Hence, banks can offer higher returns on online fixed deposits. Therefore, if you are looking for higher returns, an online fixed deposit is a better option.
Online fixed deposits are more convenient than traditional FDs as the entire process is online. Hence, investors don’t have to visit the bank branch or fill physical forms. One can easily open an FD account in minutes through the bank’s website or banking app. Therefore, if you are looking for convenience, online fixed deposits are a better option.
The tenure for FDs offered by banks varies from 7 days to 10 years. Both traditional and online fixed deposits offer the same tenure options. Hence, there is no difference in this parameter.
Minimum Deposit Amount
The minimum deposit amount for both traditional and online fixed deposits varies from bank to bank. However, online fixed deposits offer a lower minimum deposit amount than traditional FDs, making it accessible to a broader range of investors. Therefore, if you are looking to start with a small amount, an online fixed deposit is a better investment option.
Premature withdrawal is the option to close an FD before its maturity date. Traditional FDs may charge a penalty for premature withdrawal, depending on the bank’s policy. However, most banks offer an option for premature withdrawal of online fixed deposits with a lower penalty than traditional FDs. Hence, if you may need to withdraw prematurely, an online fixed deposit is a better option.
In conclusion, traditional FDs and online fixed deposits both have their respective pros and cons. However, when it comes to higher returns, convenience, and flexibility, online fixed deposits are a better option. Nevertheless, investors must weigh the pros and cons and select an investment option that suits them the best.
Disclaimer: Investments in the Indian financial market carry risk, and investors must gauge all the pros and cons before investing their money. The interest rates mentioned in this article are subject to change and should not be considered as recommendations.