For first time investors, there are a variety of investment options available for an individual to choose from. The safest options available are fixed deposits and recurring deposits. Though many believe both of these investments to be the same, they differ greatly. Some of the most common differences between Recurring deposit and fixed deposit that investors must be aware of are:
• Recurring deposit is a type of deposit in which the investor is required to deposit a fixed amount every month into their account.
• In the case of a fixed deposit, the investor is only required to deposit an amount one time. At the end of the tenure the investor can collect the amount they deposited along with the interest.
• Recurring deposit is the ideal option for individuals who wish to build their savings.
• Fixed deposit is however used as an investment option for individuals with surplus savings.
• A recurring deposit requires individuals to deposit a fixed amount each month. Not being able to do so will force the financial institution to reduce the interest amount being offered.
• A fixed deposit only requires one deposit to be made. At the end of the duration of the deposit, the individual gets their deposited amount along with the interest.
• The minimum period of such a deposit is six months while the maximum period is ten years.
• In the case of fixed deposits, the duration period is between six months to ten years. However, certain deposits also allow individuals to deposit their money for unique durations such as 190, 290 and 390 days.
Both types of deposits are low risk investment options. However, a fixed deposit does offer a higher interest rate at the end of the duration. The reason being that the interest is compounded on the entire amount deposited each month. In the case of recurring deposits, the interest is usually compounded on a quarterly basis. Since the individual has to deposit a fixed amount each month, this offers a lower interest amount at the end of the duration of the deposit.
If you are looking for a type of deposit to help build your savings, recurring deposit is the ideal choice. The monthly deposit requirement ensures that the individual is able to easily build their savings in the duration set. Fixed deposits however are a safe investment option. One can use this type of a deposit to invest their surplus savings and get interest on the same. One must always research the different types of deposits to ensure that they choose the one ideal for their needs.