Benefits and Considerations of Opening Fixed Deposits Through Digital Platforms
Unaffected by market volatility,fixed deposits (FDs) are one of the safest investment options. They come with fixed interest rates, ensuring guaranteed returns at maturity, making them a favoured option among risk-averse investors for diversifying their portfolios.
The advent of online banking services has made opening a fixed deposit account a convenient and hassle-free process. Most leading banks offer seamless digital platforms to open and manage FDs online, sparing customers the hassle of visiting bank branches, filing lengthy paperwork, and waiting in long queues. With a few clicks, you can now open a fixed deposit anytime, anywhere.
This article explores the advantages of FD accounts and highlights important factors that account holders should consider before opening an FD online.
Benefits of Opening an FD Online
Besides parking their idle funds and earning a fixed rate of interest, investors enjoy the following benefits from opening a fixed deposit online:
1. Convenience at Your Fingertips
Digital platforms streamline the FD application process, making it quick and hassle-free. All you need to do is register yourself using your mobile number, provide your PAN and Aadhaar card details, enter the principal amount you wish to deposit, select the tenure of the depositand complete the video KYC. Unlike traditional banks, which may require multiple rounds of paperwork and in-person verifications, modern banks leverage technology to expedite the process.
2. Competitive Returns
One of the major advantages of opening FDs online is access to competitive fixed deposit interest rates. Many new-age banks offer high returns, allowing your funds to grow quickly.
3. Automatic Renewal Option
When opening an FD online, you have the option to enable automatic renewal. This ensures your investment automatically gets renewed for another term upon reaching maturity. It is a boon for investors seeking a hands-off approach to managing their investments, as it eliminates the need for manual intervention.
4. Flexible Interest Payment Options
In addition to the convenience of managing your FD online, you also have the flexibility to choose your interest payment schedule according to your preferences. Whether you prefer interest payments monthly, quarterly or, upon maturity, online FDs allow you to tailor the payment frequency to suit your financial needs.
Factors to Consider While Opening an FD Account
While opening FDs online offers numerous benefits, investors must also consider certain factors before proceeding:
1. Minimum Amount
Before opening an FD account, it’s crucial to ascertain the minimum amount required. Most modern banks allow FDs to be opened for as little as INR 10,000.
2. Premature Withdrawal Penalty
Fixed deposit tenures can range anywhere between 7 days to 10 years. However, emergencies may necessitate withdrawing funds from your fixed deposit before maturity. Such premature withdrawals typically incur penalties as per the bank’s policy. Therefore, it is essential to carefully weigh the consequences of early withdrawal and assess if the penalty charges justify the need for immediate funds.
3. TDS Declaration
The bank will deduct Tax Deducted at Source (TDS) if your FD interest income exceeds INR 40,000 for regular individuals or INR 50,000 for senior citizens in a year. However, individuals falling under the no-income tax bracket must submit Form 15G or 15H as a declaration to avoid a TDS deduction. It is crucial to ensure that your declaration is updated in the bank records to prevent a TDS deduction from your FD interest.
4. The Bank’s Credibility
The credibility of the bank is paramount. Ensure you opt for a reputable and financially stable institution by researching its track record, credit ratings, and customer feedback.
The Bottom Line
Opening fixed deposits through digital platforms offers numerous benefits, including convenience, competitive interest rates, flexibility, and a paperless process. However, it is also important to consider factors such as minimum balance, premature withdrawal penalties, and credibility of the institution before opening an FD online. By carefully weighing the pros and cons, you can make informed decisions that align with your financial objectives and preferences.
