Tips to Choose the Best Bank for Opening a Recurring Deposit

Are you looking to save money regularly and earn guaranteed returns? A Recurring Deposit (RD) can be an excellent investment option. RDs allow you to invest small amounts of money regularly, ultimately building up a significant corpus over time. However, with several banks offering RD accounts, it's essential to choose the best bank that suits your needs and offers attractive benefits.

In this guide, we'll walk you through how to choose a bank to open an RD so that you can make an informed decision. Let’s dive in!

Factors to Consider to Choose the Best Bank for RD

Here are a few things you may consider while opening an RD account:

1. Interest Rates

   Every investor seeks higher returns on investments. RD interest rates are higher than Savings Accounts, almost at par with Fixed Deposits. Select a bank that offers high-interest RDs. For the uninitiated, Ujjivan SFB offers higher interest rates on RD. Also, check if senior citizens are eligible for higher interest rates.

    

2. Bank app for Easy Account Management

   Gone are the days when you had to visit a bank branch for literally every banking tasks. In this digital era, most banks have their own apps or net banking so you can manage your finances without hassle. Look for a bank that has a user-friendly app for seamless account management.

    

3. Premature RD Withdrawal Facility

   You may need urgent funds in times of emergency. Instead of taking a high-interest personal loan, you can close your RD account. However, this may come with a penalty fee. Look for banks where the penalty is lower. For example, Ujjivan doesn't charge any RD premature withdrawal fee for withdrawals made after 6 months from the time of deposit.

In addition, senior citizens are eligible for an additional interest rate of 0.50% annually.

Opening a Regular Recurring Deposit account with Ujjivan SFB is quick and easy. If you're a new customer, you can visit the Ujjivan SFB website, complete the KYC requirements, enter your RD details, and pay online for your first deposit. Existing customers can also open an RD account through internet banking, mobile banking, or by visiting their nearest Ujjivan SFB branch.

By choosing Ujjivan SFB for your recurring deposit needs, you can enjoy high interest rates, flexible tenure options, and a trusted banking partner.

Factors to Consider Before Opening a Recurring Deposit Account

Before you open an RD account, there are several factors you should take into consideration:

1. Investment Period

   The investment period is crucial in determining your RD's maturity value. RD tenure ranges from 6 months to 10 years. The interest rate would vary based on the tenure. Select a tenure that’s aligned to your investment goals. If you have short-term goals, such as saving for a vacation or buying a new gadget, opt for a shorter investment period. On the other hand, if you're saving for long-term goals like retirement or your child's education, consider a more extended investment period.

    

2. Interest Rate

   Choose a bank like Ujjivan that offers high-interest RDs. With Ujjivan, you can get higher returns with RD investments subject to terms and conditions. 

    

   Let's consider an example to understand how the interest rate impacts your returns:

    

   Suppose you invest ₹10,000 per month for three years in a bank that offers an interest rate of 8.25%. At the end of 3 years, your maturity value would be approximately ₹4,73,786.

    

   Now, if you invest the same amount for the same duration in another bank, which offers an interest rate of 8.75%, your maturity value would increase to ₹5,02,500. This shows that even a slight difference in interest rates can significantly impact your returns.
    

   Disclaimer: Please note that the above information is for illustration purposes only. Please use an RD calculator to check your returns. For latest RD rates, please click here.

    

3. Penalty for Premature Withdrawal

   Most RDs have a penalty for premature withdrawal. This means that if you withdraw your money before the end of the investment period, you may incur a penalty fee. It's essential to consider this penalty before opening an RD account, especially if you anticipate needing access to your funds before the maturity date. Ujjivan doesn’t charge any premature RD withdrawal fee for withdrawals made after 6 months from the time of deposit.

    

4. Frequency of Deposits

   RDs require periodic investments. It's essential to choose a frequency that aligns with your financial situation and cash flow. If you have a stable income and can spare a specific amount every month, opt for monthly deposits. However, quarterly deposits may be more suitable if you receive irregular income or prefer making more significant contributions less frequently.

    

5. Tax Implications

   The interest earned on RDs is taxable as per the Income Tax Act 1961. The interest income is added to your total income and taxed at the applicable tax slab rate. A TDS of 10% is levied if your interest income exceeds ₹50,000 (₹1 lakh for senior citizens) in a financial year.