Fixed Deposits Vs Savings Account: Understanding What Works Best for You

Fixed Deposit vs Savings Account

When it comes to investing money, there are a variety of options available. Two of the most popular options are fixed deposits and savings accounts. While both are safe and secure investments, they differ in terms of interest rates, liquidity, and other features. In this article, we will discuss the differences between fixed deposits and savings accounts to help you decide where you should invest your money.

Fixed Deposits

Fixed deposits (FDs) are a type of investment where you deposit a lump sum of money in a bank or financial institution for a fixed period of time, ranging from a few months to several years. One of the key advantage of fixed deposit account is that the interest rate is generally higher than that of savings accounts, and it is fixed for the duration of the deposit. This means that you can earn a fixed amount of interest on your investment.

FDs are a low-risk investment option because your money is locked in for a specific period, and the interest rate is fixed. This means that you don't have to worry about market fluctuations affecting your returns. However, FDs are not very liquid, and you can't withdraw your money before the maturity date without incurring a penalty.

Unity Bank fixed deposits offer an attractive interest rates under its Shagun Deposit scheme to its customers. The highest interest rates are for tenures of 181-201 days, 501 days and 1001 days respectively. In fact, for 1001 days, the interest rates* go up as high as 9.00% for general customers and 9.5% for senior citizens.

Savings Accounts

Savings accounts are a type of deposit account that you can open with a bank or financial institution to deposit and withdraw money as and when needed. Unlike FDs, the interest rate on savings accounts is variable and is subject to change at the discretion of the bank. This means that the interest rate on your savings account can increase or decrease over time.

Savings account are more liquid than FDs, and you can withdraw your money whenever you need it. This makes them a good option for emergency funds or short-term investments. However, the interest rates on savings accounts are generally lower than FDs, and you may earn less interest on your investment.

Still, Unity Bank offers a very lucrative up to 7.5% rate of interest* paid monthly on your savings account, which is currently one of the highest in India.

Which One Should You Choose?

The choice between fixed deposits and savings accounts ultimately depends on your financial goals and investment preferences. If you are looking for a low-risk, long-term investment option and don't need the money for a specific period, the benefits of fixed deposit account would work well. On the other hand, if you need easy access to your funds and want a low-risk, short-term investment, savings accounts may be the better option.

It's also important to consider the interest rates offered by different banks and financial institutions before making a decision. Compare the interest rates on both fixed deposits and savings accounts to determine which option offers the best returns.

In the final analysis, fixed deposits and savings accounts are both safe and secure investment options. While fixed deposits offer higher interest rates, they are less liquid and require a long-term commitment. Savings accounts, on the other hand, offer lower interest rates but are more liquid and provide easy access to your funds. It's important to weigh the pros and cons of each option and consider your financial goals before making a decision.

*Interest rates are subject to change