Opt for cumulative FDs where the interest earned is reinvested. This allows you to benefit from the power of compounding, leading to higher returns over the long term.
Fixed Deposits (FDs) are a popular investment option for risk-averse investors. This investment option offers guaranteed returns over a fixed period. While traditional banks offer competitive interest rates, small finance banks often provide higher returns on FDs.
Here’s how you can make the most of your FD investments in small finance banks.
Compare Interest Rates
The first step is to compare FD interest rates offered by different small finance banks. Rates can vary significantly, so doing your homework can lead to higher returns. Websites and financial platforms often list and compare current rates, making it easier to find the best deal.
Consider Different Tenures
Small finance banks provide varied interest rates based on the tenure of the FD. Short-term FDs (7 days to 1 year) and long-term FDs can have different rates. Choose a tenure that aligns with your financial goals while maximising interest returns. Sometimes, mid-term tenures (1-3 years) offer the best rates.
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Leverage Special Schemes
Small finance banks frequently introduce special schemes that offer higher interest rates for specific periods or customer segments, such as senior citizens or new customers. Keep an eye out for such offers and take advantage of them to boost your returns.
Reinvest Interest Earnings
Opt for cumulative FDs where the interest earned is reinvested. This allows you to benefit from the power of compounding, leading to higher returns over the long term. Non-cumulative FDs, where interest is paid out periodically, do not offer this advantage.
Look for Loyalty Benefits
Some small finance banks offer loyalty benefits to existing customers, which can include higher interest rates on FDs. If you already have an account with a small finance bank, inquire about any additional benefits you might be eligible for when opening an FD.
While small finance banks offer higher returns, ensure you assess their financial stability and credibility. Look for banks with good credit ratings and strong customer reviews to minimise risk. By choosing the right small finance bank and the best FD terms, you can significantly enhance your returns, ensuring your money works harder for you. Always stay informed and make decisions based on thorough research to maximise your investment’s potential.
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