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Difference Between Savings Account and Fixed Deposit Account

2022-04-13
3 Min Read
Author - Vishal Devnani
Difference Between Savings Account and Fixed Deposit Account
239 views

In today’s world, where markets are volatile, investments are imperative for growing wealth. However, people are oblivious about how and where to invest their hard-earned money. This blog covers the two best investment tools, i.e. Savings Account and a Fixed Deposit Account and difference between savings account and fixed deposit account that can help you attain your financial dreams.

What is a Savings Account?

It is a type of account where a depositor keeps his money with the bank in return for the interest that banks provide on the savings account. These accounts are best known for the safety and security of the money invested. You can easily deposit or withdraw your financial holdings in your savings account, digitally or in person.

What is a Fixed Deposit Account?

A fixed Deposit, also known as FD, is a long term investment tool offered by the banks & NBFCs that allows you to invest your money at a predetermined rate for a fixed period. The depositor receives a lump sum amount that includes principal and interest amount at the end of the tenure. In addition, the rate of interest offered on fixed deposits varies from lender to lender.

Key Differences between a Savings Account and a Fixed Deposit Account

Both financial tools are considered the best for investment purposes, yet they are very different. There is a list of differences that can be taken into consideration, keeping in mind the merits of both of them.

  • One of the primary differences between a savings account and a fixed deposit account is that there is no limit on the maximum amount of money that you can invest in a savings account. On the other hand, investors need to invest a fixed amount of money in a fixed deposit for a specific period. However, banks require you to maintain a minimum balance in your savings account unless you have deposited your money in a zero balance savings account
    • A savings account gives a lower interest rate, generally upto 7%. On the other hand, fixed deposit interest rates are higher and can go upto 6.80% p.a for the general public and 7.05% p.a for senior citizens FD as of April 2022.
    • In a savings account, a depositor can withdraw his money prematurely as there is no fixed investment period. However, in a fixed deposit account, lenders charge a penalty for premature withdrawal of a fixed deposit . It is because the amount invested in a fixed deposit is for a fixed period.
    • While you can avail of upto 90% of your deposits as a loan against a fixed deposit , on the other hand, a person can not demand a loan against the amount in a savings account.
    • The minimum balance threshold for a savings account is less than a fixed deposit account.
    • A depositor can not avail of tax benefits from a savings account. However, as per section 80 of income tax, a depositor can enjoy tax exemption from a fixed deposit account.
    • Savings accounts are continuous, where a person has the option of investing at any time. Whereas fixed deposit accounts are rigid, and one can not augment money in the middle of the tenure.

    Savings Account v/s Fixed Deposit: Top Banks Comparison

    Fixed Deposit Interest Rates Of Top 3 Banks In India

    Below is the list of the latest interest rates by the top banks in India as of April 2022.

    • HDFC Bank FD offers the highest FD interest rate of 6.65% p.a for the general public ranging from 33 months to upto 99 months. For senior citizens, the interest rate is upto 6.50% p.a.
      • PNB Housing Finance Fixed Deposit offers an interest rate of 5.75% to 6.85% p.a for the general public from one year to upto 10 years. For senior citizens, the interest rate is 6.00%- 6.95% p.a.
        • Bajaj Finance Fixed Deposit offers the third highest interest rate of 5.65% to 6.80% p.a for the general public for 1 year to 5 years. For senior citizens, it offers an interest rate of5.90% to 7.05% p.a.
        • Savings Bank Account Interest Rates Of Top 3 Banks In India

          Below is the list of the latest interest rates on savings accounts by the top banks in India as of April 2022.

          • Yes Bank Savings Account Savings Account offers an interest rate of 4.00% for all Savings Accounts with a balance upto INR 1 Lakh. The interest rates range between 4.00% to 5.25%
            • DBS Bank Savings Account Savings Account offers an interest rate between 3.00% to 4.00% on the average monthly balance of INR 5000.
              • HDFC Bank Savings Account caters to their customers with an interest rate ranging from 3.00% to 3.5%.
              • Conclusion

                A savings account and a fixed deposit account are financial tools that safeguard your money and give you a decent rate of return. Both of them help generate wealth and create regular income. Therefore it is important to understand difference between savings account and fixed deposit account, their comparison i.e, savings account vs fixed deposit account. However, they are different and used for different purposes. A savings account is a continuous account that you can open for a regular income. On the other hand, you can invest in a fixed deposit account to earn long-term interest.

                About Author

                Vishal Devnani
                Vishal Devnani is an explorer, forever learner and a curious content writer. He loves imparting knowledge with his evergreen and easy to read write-ups.

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