Have You Been Thinking Of Fixed Deposit Accounts?
If you are wondering how you should invest or save money, you need to be knowledgeable about your choices.
Specifically, you should know the pros and cons of each investment that you choose to explore. Here we will be delving into the realm of fixed deposit accounts; what their interest rates are like, term deposits, and time deposits.
You may have heard these terms thrown around but may not know exactly what they mean.
Here we will explore them in some detail.
What Are Fixed Deposit Accounts?

So first let’s get into the intricacies of fixed deposits accounts.
A fixed deposit is an investment tool that allows you to deposit a lump sum of money for a fixed term with a reputable financial institution. Your deposit or investment will earn you interest for that specific period.
How Competitive Are Fixed Deposit Interest Rates?
Once you can afford to open a fixed deposit, we encourage you to go for it. Fixed deposits are notoriously known for their high interest rates. They will always be higher than what savings accounts offer. However, you should be aware that fd interest rates are fixed. While they are high, you will not be able to benefit from variable interest rates.
How Are Fixed Deposit Investments Calculated?

How Are Fixed Deposit Investments Calculated?
This is important if you decide to open a fixed deposit account. You need to know how your fixed deposit interest rates will be applied. Fixed deposits can utilize simple interest or compound interest.
You may have come across the simple interest calculation and it is
The formula is as follows:
X = P + (P x r x t/100),
X= Final amount (the initial investment plus whatever interest is accrued)
P= the principal amount deposited
r = interest rate per year
t =time or tenure (years)
or compound interest
You may be familiar with the formula for compounding.
Y= P (1 + r/n)^(nt)
Y= Final amount
P =Principal (This is the amount that you invest in your fixed deposit account)
r = fixed deposit interest rate
n = the amount of times interest is applied per period
t = the time/ tenure- the number of years you will be leaving your fixed deposit to accrue interest.
That Are The Benefits That I Can Expect From A Fixed Deposit Account?
Fixed deposit accounts are extremely attractive investments, there are several benefits that you can look forward to:
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Safe Investment- With fixed deposits, there is no risk of losing your principal or initial investment. Your returns on this type of investment are guaranteed.
Option for periodic interest payouts- This is a pretty convenient feature. Fix deposits come in the cumulative or the non-cumulative variety. Some fixed deposits allow you to access your accrued interest. This is the non-cumulative option. Your financial institution may offer monthly, quarterly, bi-annually, or annual interest payments. This can come in handy if you need your money for your various financial commitments.
Unaffected by market fluctuation- the fixed deposit interest rates are unaffected by market rates. This further adds to the security of your invested capital. That is to say, if the interest rates fall, your investment will not be affected.
High interest rates- Fixed deposits offer highly competitive interest rates, it is guaranteed to be higher than what would be offered by a regular savings account. Also, you should know that the longer the term or tenure, the higher the interest rate.
Senior citizens deals- If you are a senior, a fixed deposit might be an investment worth looking into. You may be eligible for higher returns.
Are there any drawbacks to fixed deposits?
One deposit- You can only make one deposit into your fixed deposit account. Unfortunately, if you want to put more money into your fixed deposit, you will have to open an entirely new account.
No access to your investment- As the name suggests you cannot touch your deposit for the stipulated amount of time or tenure that you choose. This is not the investment for you if liquidity is your goal. If you choose to withdraw your deposit, you will be heavily penalized.
No access to favorable market rates- So while your fixed deposit investment is safe, there is a downside to this. If the financial market is enjoying high-interest rates, you will not be able to take advantage of it.
How long can a fixed deposit tenure be?
Fixed Deposits (FDs) tenures can be anywhere from 7 days to a period of 10 years.
Can I renew my fixed deposit after the date of maturity?
You most certainly can. Most fixed deposits come with an option to renew.
What is a term deposit?
A term deposit is an umbrella term, so to remain on point, a fixed deposit is a type of term deposit. A certificate of deposit is also another example of a term deposit. A term deposit can be defined as an investment for a fixed predetermined amount of time at a fixed interest rate.
In the interest of knowing what is available, there are 6 types of term deposits:
Short-term deposits- It is ideal for short term saving goals. It is usually for a duration of 1 month to 1 year.
Long-term deposits- This is perfect for those who have a lump sum that they don’t need immediately and have long term goals.
Advance notice term deposits- These investments allow you to make a withdrawal once you give prior notice.
No notice term deposits- You’re allowed to make a withdrawal and no notice is required.
Interest paid monthly term deposits- You are able to access your interest on a monthly basis. This comes at a price though; you may only be offered a low-interest rate.
Low balance term deposits- This is an excellent option if you are low on cash. There is often no minimum requirement amount at all.
What is a time deposit?
The terms time deposit and term deposit are often used interchangeably, but usually, time deposit is used for short term investments ranging from days to months.
If you are interested in a safe long-term investment, you should look into a fixed deposit account. You can follow this link HERE for more details!
May you continue to make good financial choices that propel you to prosperity.