New Delhi. Almost everyone knows about normal bank deposits. Bank deposit means keeping money in the bank and getting some interest on it. People consider this as an investment. But most people do not know that the ways of keeping money in the bank can also be different, with the help of which they can get higher returns. Higher return means more profit. Recurring Deposits are one such option which pays higher interest than regular deposits.
Recurring Deposit (RD) is a little different from normal bank deposits. Most of the investors, who have to deposit money in the bank little by little for some time, they do the recurring deposit only. Recurring deposits are also as safe as fixed deposits. In this, the investor has to deposit some money every month, for a certain period. When it matures in the scheme, the investor gets his deposited capital along with interest. Recurring deposits can also be made for a short period of time and the interest rate on it is generally higher than the savings made.
Features of Recurring Deposit
If we talk about the features of Recurring Deposits, then the investor can start with a small amount in it. You can also opt for monthly, 3-month, 6-month installments. Regular monthly savings earn interest and contribute to setting up a short term savings account. With RD it is possible to arrange installments to build the required capital for future use. By requiring you to make regular monthly contributions, a Recurring Deposit plan encourages you to save.
Keeps investments on track Regular payouts
Regular payments are a good way to keep your investments on track. Since the installments are to be paid on a fixed date every month, the investor has to set aside the installment amount for the RD. It inculcates discipline as well as the habit of saving up to the installment amount.
Anyone above the age of 10 years can start an RD account in their respective bank. Most of the banks allow youth to make regular deposits using a joint account of a parent or legal guardian. It facilitates the creation of investments for the benefit of the minor.
No bank will refuse to give loan
Both FD (Fixed Deposit) and RD (Recurring Deposit) pay the same rate of interest to most of the bank customers. As a result, they can be effectively used as an income source. Investment income is compounded for three months and in some cases monthly, allowing the investor to receive both interest and capital. In Recurring Deposit, you can borrow money from the bank only on the security of RD. If you have RD then most of the banks will lend you money. This loan can be as much as 95% of the RD amount. It can be used in emergency.
