Difference Between Fixed Deposits FDs and Recurring Deposits RDs

Looking at the unpredictability of the present times, it is important to invest in different funds to secure your future well. Irrespective of the fact how much you are earning currently, getting investments done for the future is a must for everyone.

Fixed Deposits (FDs) and Recurring Deposits (RDs) are two such important and low risk investments which suit investors looking for safe investment options. However, the two plans have certain differences too, which we are discussing in this post.

What is a Recurring Deposit?

Recurring Deposit (RD) is an investment plan offered by almost all banks, post-offices and other financial institutions in India. An investor can contribute a particular sum of money to their RD account to receive guaranteed returns after a fixed tenure, which is decided by the investor at the time of buying the plan. It can range in between 6 months to 10 years. Also, the interest rate offered under RD varies as per the bank that you are getting your RD account opened.

Features of Recurring Deposits

• RD supports an investor to invest money regularly and to develop the habit of saving. Also, the corpus accumulated can be used to meet your future goals in life
• The minimum amount required to open a RD account is INR 500 and it can be any maximum amount as per your income
• The investor has the flexibility of choosing the tenure of an RD
• The corpus of RD accounts can also be used as collaterals for loans

What is a Fixed Deposit?

A Fixed Deposit (FD) is a type of investment that allows the investor to invest money for a fixed period of time and to earn high returns in exchange. You can open a FD account at a post office, bank, or in a NBFC as per your choice. However, you must check the interest rate offered by a particular financial institution as it may vary depending on the financier. The returns on the account, however, are as per the tenure of the FD and the amount deposited by the investor.

Features of Fixed Deposits

Below are some features of FD;

• FD account can be opened without any hassle at your nearest post office or bank
• FD accounts allow a rate of interest which is high as compared to saving accounts
• FD account can be renewed as per your convenience
• The maturity amount earned from your FD account cannot be withdrawn before the end of the FD tenure

Recurring Deposit (RD) Vs Fixed Deposit (FD)

Let us now take a look at the key differences between Fixed Deposit and Recurring deposit in the table below.

Feature	Recurring Deposit	Fixed Deposit
Frequency of Investment	It can be any amount of money that can be invested by the investor regularly at intervals	In this case, the investor is required to invest an amount as a one-time investment and cannot make any further contributions later on during the term of the investment
Duration of deposit	Recurring deposit allow the investor to choose a duration of 6 months to over 10 years	In case of fixed deposit, the duration of tenure can range from 7 to 10 years
Interest Earned	The interest earned in recurring deposit is similar or low than that of FD interest	The interest earned under fixed deposit is higher than recurring deposit
Withdrawal of Maturity	The RD maturity deposit can be withdrawn on a quarterly or regular interval	In a fixed deposit, the maturity amount is only provided after the end of the FD tenure
Benefit Offered	With RD, one can inculcates the habit of savings by investing money in the RD deposit regularly/monthly	Fixed deposit, on the other hand, is a lump sum amount that is deposited and on which the investor can earn interest
Clause of Payment	In RD, if you do not make a payment for 6 months or more, there are chances of the RD account getting closed	On the other hand, in case of FDs where the total payment is made in one go, there is no clause of payment attached with the FD

Which One would you pick – RD or FD?

Now that you know the meaning and the difference between fixed deposit and recurring deposit in India, the question that comes to your mind is which investment plan to choose – RD or FD.

It actually depends on the investor to choose between the two plans. Both these plans are low-risk options and depending on your finances or the ability to pay (lump-sum amount or small regular amount), you can make the choice.