People prefer to invest in Fixed Deposit (FD) accounts rather than keeping the money at savings account, this is because, the rate of interest of a fixed deposit is much higher. People invest a large sum of money in FD account for a considerably higher matured amount in the future.
But, before you apply for an FD, you should use an FD calculator. Most financial institutions provide an FD interest calculator that allows depositors to estimate the matured payments. One more factor that you need to know before applying for an FD, is the type of FD accounts. It can be cumulative or non-cumulative depending on interest withdrawal. Depositors who want to get interest payments on monthly, quarterly or half-yearly withdrawal, they can apply for non-cumulative fixed deposit accounts. Otherwise, if you want to get the interest rate the end of the tenor, you can apply for a cumulative FD account.
Now, after you have invested in FD, you want some money, you may think of breaking your FD account prematurely. You must be aware of the fact that premature withdrawal of Fixed Deposits will affect your interest calculation.
Even if you have a small deposit or a large one, premature withdrawal of fixed deposits will involve penalties. All financial institutions will calculate net received amount after withdrawal as (Deposited amount * interest rates for given term at the time of depositing) – 1%.
You should actually compare the situations of FD continuation and FD withdrawal and then take the decision. To know more, read:
Why is Premature Withdrawal of Fixed Deposit a Bad Idea?
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.