FD Investment has always been a trusted investment option for many. The investment instrument provides safety in terms of principal and interest. There are a few simple strategies that you can avail of to help you make more with the same investment from a fixed deposit. Starting from how to find the best FDs, interest calculations to overdraft facilities, everything will be discussed to ensure you get the best out of your FD. If you want to make more from your FD, read on.
5 Ways to Earn a Higher Interest from Your FD Investment
Given below are five methods that every fixed deposit investor should know to make more out of their FD. These are options that can be used to maximize returns irrespective of your fixed deposit rates.
Conduct Proper Research on interest rates
Rates vary from bank to bank, and each bank has a different scheme concerning FDs. Research thoroughly on what different banks, financial institutions, and Non-Banking Financial Companies (NBFCs) are offering you to make the right choice based upon your needs.
Note: Keep in mind that higher interest rates come are usually associated with a high-risk lender or a new lender looking to establish a market.
Understand Interest Calculation
The frequency of compounding of interest is important. The value of interest compounded affects the total amount you will receive when the FD matures.
- Bank A offers 9% interest with quarterly compounding.
- Bank B offers 9% interest with yearly compounding for a 3-year FD.
Then at the end of three years for a principal amount of Rs. 1 lakh, you will get Rs. 1,23,144 lakhs from Bank A and Rs. 1,22, 504 from Bank B. You can find out the impact of compounding by using the online FD calculator.
Divide Investments to Save TDS
If the interest from your fixed deposit exceeds Rs. 10,000 per year, then the bank deducts TDS at 10%. You cannot avoid the deduction by spreading your FD amount across different banks. However, you can save on the TDS by depositing the FD in the name of family members or HUF accounts.
Reinvest the Interest
When your fixed deposit matures, you can reinvest the interest earned to earn higher returns. Take, for example, that your principal is Rs. 1 lakh and you earn an interest of Rs. 8,000/- at the rate of 8% on it. You can invest the Rs. 8000 back into the FD or in another investment option and keep adding to your earnings.
If there is an emergency, you can always use the overdraft facility and repay the overdraft within the deadline. Lenders extend loans based on FD amounts and maturity period. Taking an overdraft does not stop your interest earnings, though you are required to pay interest on the amount withdrawn.
Maximize Your FD returns with PNB
You can get the best rates for FDs by comparing the different interest rates, maturity periods, and other facilities offered by the lending institution. Always use the fixed deposit calculator to judge which bank best meets your needs!