Do you need to consider interest rates before opening an FD?

Investing your money is crucial for financial planning. While there are various investment instruments you can choose from, a Fixed Deposit is often one of the popular options. It is also one of the most common financial instruments most banks offer their customers. FDs are excellent for investors who want to save for long-term financial goals but want to avert risks. 

They are also easy to open, and you can conveniently open yours online. However, before you open your FD Account, you need to consider certain factors. One of these is comparing the Fixed Deposit interest rates.

Why consider FD rates?

When you open an FD, you deposit a certain sum for a fixed tenure with a bank. Banks let you choose the term and offer tenures ranging from a few days to several years. In return, the bank offers interest at a fixed rate. This rate is fixed at the start of the tenure and remains the same throughout.

Banks usually fix their FD rates. Hence, it may be different for different banks. It also differs according to the tenure you pick. Therefore, compare the latest FD rates banks offer before opening an FD. 

Other factors to consider

Besides the interest rate, you also need to consider the following factors when opting for an FD:

  • FD tenure

Since FDs are open for a specific time, it is essential to pick the tenure carefully when opening one online using the Banking app. FD tenures usually range between seven days and 10 years. So, consider it carefully and ensure you match it to your financial goals and needs.

  • Cost of premature withdrawals

Besides Tax-Saving FDs, which have a five-year lock-in period, most banks usually let you withdraw your FD before maturity. This is beneficial during emergencies. However, you may need to pay a penalty to avail of it. This fee typically varies across banks. So, determine this cost before opening your FD.

  • Type of interest payout

Depending on your requirements, you can opt between two kinds of payouts for your Fixed Deposit Account: Cumulative or Non-Cumulative. In the case of a Cumulative FD, the total interest accrued is re-invested and paid to you with the principal amount at maturity. Conversely, for a Non-Cumulative FD, the interest gets credited to your Bank Account periodically. It is usually credited monthly, annually, quarterly, or half-yearly, depending on the payout interval you select.

  • Nomination

If the FD holder suddenly dies during the FD tenure, the nominee added by the holder would receive the amount. Hence, when using online mediums to open an FD, you could consider adding a nominee.


FDs are considered one of the safest investments in India. However, before you open your FD Account, consider the FD interest rates and other factors to ensure you earn the expected returns.

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