6 Tricks That Will Help You To Earn More in Your Fixed Deposit Plan
Fixed deposits (FDs) are safer than risky investment options like equity or mutual funds. But, low FD interest rates often push investors away. However, if you are observant and intelligent, you can get higher interest rates than ordinary investors. This article discusses six proven tips and tricks to get high returns from fixed deposit schemes.
6 Proven Tricks to Get More Returns From Your FD in 2022 –
- Choose the Financial Institution Carefully
The right financial institution heavily influences the returns from fixed deposit schemes. You can approach three financial institutions to open a fixed deposit account. They are – banks, non-banking financial corporations, and housing finance companies. Unlike banks, non-banking financial corporations and housing finance companies typically follow a lean service delivery model, a reason why they can offer the highest FD interest rates. For example, a quick scan of FD returns of top financial institutions shows that housing finance FD returns are generally 2% to 3% higher than most scheduled commercial banks.
Hence, choosing the right financial institution is the easiest way to increase your income from fixed deposit schemes.
- Invest Online
You can invest in fixed deposit schemes in two broad ways – online and offline. While there’s no such rule, it is still often seen that financial institutions offer something extra to online investors. However, before investing in an FD online, you must verify the reputation and stability of the financial institution. When it is about your hard-earned money, it is prudent not to take risks.
Hence, online fixed deposit schemes might offer you some extra returns than offline FDs.
- Invest in Cumulative Fixed Deposit Schemes
Fixed deposit schemes can be cumulative and non-cumulative. While a non-cumulative FD disburses the interest periodically, cumulative FDs usually offer the highest interest rates. So, if you invest in a 10-year non-cumulative FD with an interest rate of 6.80%, you will get interest at 6.80% throughout the term. But, if you choose a cumulative scheme of the same duration and with the same interest rate, the yield to maturity may go up to 9.13%.
Hence, cumulative fixed deposit schemes can help you get the best returns.
- Avail of the Auto-Renewal Facility
When you invest in a fixed deposit scheme, the financial institution announces the maturity date. The maturity date is also the last date for receiving the interest amount. You will not get any interest if you keep the principal and interest in your account after maturity. Opting for the auto-renewal facility can be a wise choice for such times. If your account is auto-renewal enabled, the financial institution will automatically renew your fixed deposit on maturity.
Hence, the auto-renewal facility ensures no time or interest loss after fixed deposit maturity.
- Invest in Your Parents’ Accounts
If your father, mother, or a close relative is a senior citizen, you may request them to invest in fixed deposit schemes on your behalf. Senior citizens usually get higher interest rates by 0.25% to 0.50% than ordinary investors. And, if your capital is substantially high, even a 0.25% difference in the interest rate can work wonders.
- Do Not Close Prematurely
Since fixed deposit schemes are semi-liquid, you can withdraw the investment amount any time by paying a small penalty. However, closing an FD prematurely reduces the effective interest rate. So, if you need money urgently, you can apply for a loan against FD. Loan against FD interest rates is usually 2% higher than the highest rates.
Conclusion
The six proven tricks mentioned here must give you the right edge in investing. So keep these tips and tricks in mind to get higher-than-average returns and grow your capital quickly.