If you want to earn good returns without putting a large sum at one go, then a recurring deposit (RD) could be one of your best bets. It is a form of term deposit and allows you to make regular deposits and earn good returns without any risk. Here are some tips to help you make the most out of your RD account.
Choose the right bank
Once you sign up for an RD scheme, every month the agreed amount will get deducted from your savings account and be deposited into your RD account. It is essential to choose the bank that gives you hassle-free services.
The interest rates vary from bank to bank. So, opt for a bank that gives you the most competitive rate on your RD. The RD rates currently range between 5.5% and 7.5%.
Keep tenure aligned to your goals
The minimum tenure is usually six months or 12 months and the maximum tenure can go up to 10 years. You must select the tenure carefully, considering your financial goal. For example, if you need to pay your child’s education fee in 12 months, you can choose that as a tenure.
Choose RD amount wisely
Before signing up for an RD account, remember that a particular amount of money will get deducted every month. Choosing the wrong amount might put a financial burden on you.
Adhil Shetty, CEO, BankBazaar.com, says, “Recurring deposits offer guaranteed, liquid returns and may be ideal to fund short-term goals spanning 1 to 3 years. The returns offered by an RD are similar to those offered by fixed deposits (FDs). But RDs, unlike FDs, don’t require a lumpsum deposit.”
Avoid premature withdrawal
Unless it is an emergency, avoid premature withdrawal of your deposits in an RD account. Premature withdrawals may invite penalties. So, calculate your returns and align them with your goals.
