Recurring Deposits benefit those who seek short- to medium-term financial goals, like paying tuition fees for their children’s education. Almost all banks and post offices offer such a service. Benefits include higher returns than a Savings Account, no risks, and safe investment options.
Most of the benefits associated with a Recurring Account make it suitable for investing your hard-earned money in instalments. You can opt for the investment amount and tenure. When the tenure ends, you get the maturity amount, including the deposit and interest rate amounts accumulated over maturity.
Benefits
If you do not have a huge corpus, you can save it in smaller instalments and gain assured returns than a Savings Account, which requires minimal investments. Here are the other benefits of opening an RD:
Online investments
Investing in an online Recurring Account is hassle-free, secure, and time-saving. Almost all banks offer Online Banking services through websites and apps. You can follow the steps through the bank’s website or mobile app to open an RD, set monthly instalments and tenure, and start investing.
Better interest rates
The Recurring Deposit interest rates offered by banks are relatively better than Bank Accounts. The interest rate varies between banks and according to the policies too. The higher the interest rates, the better the returns from investments.
Lower tenures
Many investments need your commitment for at least 12 to 24 months. But that is not the case with RDs. The minimum deposit period is as low as six months. So, you can earn a decent return in the short term. You can decide between six months to 10 years and invest as per your financial goals.
No risks involved
Your Recurring Account are as secure as a Fixed Deposit. Unless the bank where you opened the RD collapses entirely, which does not happen with reputable banks, then there are no risks involved. Moreover, Deposit Insurance and Credit Guarantee Corporation, a specialised division of the RBI, offers complementary Insurance of Rs. 5 lakh to all account holders for each bank.
Achieve short-term goals
A Recurring Account would help if you want to save money for short-term goals like home renovation or wedding. Upon maturity, you will have lumpsum money handy. The maximum tenure is 10 years, allowing you to choose according to your goals. If the total interest earned on RDs is more than Rs. 40,000 and more than Rs. 50,000 for senior citizens, the TDS would be 10%.
