How to Automate Your Recurring Deposit Payments

Systematically saving money is an essential part of financial planning. With Recurring Deposits you can start saving every month with any amount of your choice, usually starting at ₹100 and enjoy the benefits of compounding. By setting up automatic payments, you can ensure that a fixed amount is deducted from your account at regular intervals and deposited into your recurring deposit (RD) account. This hassle-free systematic way of investing not only helps you save consistently but also eliminates the risk of missed payments.

In this article, we will guide you through the RD automation process, highlighting the benefits and providing step-by-step instructions. 

Benefits of Automating Your Recurring Deposit Account

RD automation offers several advantages that can make saving easier and more convenient:

1. Consistency

   By setting up automatic payments, you ensure that you contribute to your RD on time every month. This consistency helps inculcate a saving habit and brings discipline to your financial planning.

    

2. Convenience

   Once you automate your RD payments, you do not have to worry to make manual transfers each month. The funds are deducted automatically from your bank account and deposited into your RD, saving you time and effort.

    

3. Flexibility

   Most banks allow you to choose the frequency of your automated RD payments – it could be monthly, quarterly, or any other interval that suits your preferences and financial goals.

    

4. Penalties and Fees

   By automating your RD payments, you avoid missing any deposits, which can lead to penalties and fees and reduce your returns. However, kindly note that having insufficient account balance would lead to missed payments. Multiple missed payments could compel the bank closing your account.

    

How to Automate Your Recurring Deposit Payments

Setting up automatic payments for your recurring deposit is a simple process. Here's a step-by-step guide to help you get started:

Step 1: Choosing the Right Bank

First things first. Choose a bank that offers convenience and higher returns. With Ujjivan SFB you can automate your RD plus enjoy higher returns.

Step 2: Open a Recurring Deposit Account

If you already have a Savings Account with Ujjivan, opening an RD would be a walk in the park. All you need to do is select your RD amount, frquency and tenure and link your Savings Account. No additional KYC required. In case you don’t have Savings Account with us, you have to link your existing bank account with the RD account. 

Step 3: Set Up Automatic Payments

After linking your bank account to RD account, your RD would be automated. Every month, the pre-determined amount (as selected by you) would get deducted from your Savings Account and deposited in your RD. You can use Internet or Mobile Banking services to track your Recurring Deposit. Please note that the interest is usually compounded on a quarterly basis.

A Simple Example of RD Automation Vs Manual Transfer 

Consider that you want to save ₹10,000 per month for 3 years in an RD account with an annual interest rate of 7%. Here's how your savings would vary based on different payment methods. 

1. Manual Deposits

   Without automation, you manually transfer ₹10,000 to your RD account each month for 3 years. At the end of the tenure, your total investment would still be ₹3,60,000, plus interest of ₹41373. However, if you forget to deposit the amount in any given month(s), there would be penalties, which could push your total returns lower than ₹401373.

    

2. Automated Deposits

   With automation, ₹10,000 is automatically deducted from your bank account and deposited into your RD each month for 3 years. At the end of the tenure, your total investment would still be ₹3,60,000, plus interest of ₹41373. There is no question of getting lower than ₹401373. 

    

   In both cases, the total investment remains the same. However, by automating your payments, you eliminate the risk of forgetting to make deposits and ensure consistency in your saving routine. This also eliminates the possibility of fines and penalties for delayed payments.