A Guide to Recurring Deposit Fees and Charges

December 03, 2024

what-are-the-fees-and-charges-associated-with-recurring-deposits

Whether you are saving for a future goal or building an emergency fund, Recurring Deposits (RDs) offer a convenient way to save money while earning fixed returns. However, life is unpredictable, and there may be times when you need to access your RD funds before the maturity date. 

 

Breaking or prematurely withdrawing funds from an RD can come with certain costs that you should be aware of. In this guide, we will delve into the various recurring deposit account fees and provide strategies and tips on how to manage these fees effectively. 

 

Understanding Recurring Deposit Account Fees

Maintaining an RD account doesn’t incur any charges. However, premature withdrawal of RD has its implications. For example, if you withdraw RD within 3 months, you won’t earn any interest. Also, 1% penalty charge would be applicable on the prevailing interest rate. Also, if your RD account becomes inactive, as in you miss making RD payments multiple times, the bank may close your account.

 

Strategies for Minimising RD Fees 

  • Compare Penalty Charges Across Banks: Before opening an RD, compare the RD premature penalty fees of different banks. Ujjivan doesn’t charge premature withdrawal fee for withdrawals made after 6 months from the time of deposit.
  • Maintain Regular Deposits: Avoid non-maintenance fees by ensuring you deposit the RD instalment on time each month. Set up a standing instruction or automate your deposits. 
  • Plan Withdrawals Carefully: Unless faced with an emergency, try to stay invested until maturity to avoid premature withdrawal penalties which can be as high as 1% of the withdrawn amount. 

 

Tips for Effective Cost Management

In addition to minimising RD fees, practicing prudent cost management can help you maximise savings. Here are some suggestions: 

  • Maintain a Budget: Keep track of your income and expenses to identify areas where you can cut costs and redirect savings towards your RD. 
  • Automate Savings: Set up automatic transfers from your salary account to your RD to enforce saving discipline and avoid missed instalments. 
  • Increase Deposit Amount Periodically: As your income grows, consider increasing your monthly RD instalment to boost your savings. 

Final Thoughts

Recurring deposits can be a powerful tool for savings and wealth creation, but unchecked fees and charges can hamper your returns. By understanding the different types of recurring deposit account fees, analysing their impact, and implementing strategies to minimise them, you can make the most of your RD investments. 

 

Start small, dream big! Invest in Ujjivan Small Finance Bank’s Recurring Deposit and enjoy higher interest rates! Save for your long- and short-term goals with our RD and live a stress-free financial life. Start investing with just ₹100! 

 

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FAQs

1. Can I break an RD and transfer the funds to another bank?

Yes, you can break an RD and transfer the funds to another bank if required. However, if you break your RD prematurely, you may lose out on the interest rate or a penalty fee could be levied. 

2. Is there a minimum tenure for breaking an RD?

There is a minimum tenure of six months for breaking an RD. However, some banks may have certain restrictions or charges for premature withdrawals within a specified period. 

3. Can I open another RD after breaking one prematurely?

Yes, you can open another RD after breaking one prematurely. 

4. What are some alternative options for accessing funds without breaking an RD?

Consider exploring overdraft facilities, or emergency funds as alternatives to breaking an RD. 

5. Are there any tax implications for breaking an RD before maturity?

Yes, the interest earned on an RD is subject to taxation as per your income tax slab. Premature withdrawal may impact your tax liability. 

6. How can I minimise penalty charges when breaking an RD?

Plan your RD withdrawals strategically by timing withdrawals closer to the maturity date. 

7. Can I change the RD instalment amount during the tenure?

Banks do not allow changing the RD instalment amount during the tenure. 

8. What should I do if breaking an RD hampers my long-term financial goals?

Consult with a financial advisor or banking representative to understand the implications and explore suitable alternatives that align with your goals. 

9. How can I find out the fees for my recurring deposit account?

You can find all the latest RD rates here.

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