Flexi fixed deposits v/s savings accounts: Which is better?
What's the story
Flexi fixed deposits (FDs) are a hybrid investment option that combines the benefits of fixed deposits and savings accounts. They give you the flexibility to withdraw funds without penalty, unlike traditional FDs. This article explores when flexi FDs can be a better option than savings accounts, considering factors like interest rates, liquidity, and financial goals.
#1
Interest rates comparison
Flexi FDs usually offer higher interest rates than regular savings accounts. This means that if you have a lump sum amount to invest for a short term, a flexi FD can yield better returns than a savings account. The difference in rates can be as much as one to two percent, depending on the bank and market conditions. This makes flexi FDs an attractive option for those looking to grow their money without locking it away completely.
#2
Liquidity benefits
One of the biggest advantages of flexi FDs is their liquidity. You can withdraw money anytime without paying any penalties or losing interest on the withdrawn amount. This is unlike traditional FDs where premature withdrawal may lead to loss of interest or penalties. For people who want to keep their money accessible but still want to earn higher returns than a savings account, flexi FDs provide the best of both worlds.
#3
Financial goals alignment
Choosing between a flexi FD and a savings account also depends on your financial goals. If you have short-term goals or need emergency funds, a savings account may be more suitable due to its immediate accessibility. However, if you're looking to park funds for medium-term goals while still keeping them liquid, a flexi FD could be more beneficial.
#4
Minimum balance requirements
Another factor to consider is minimum balance requirements. Some banks impose minimum balance requirements on savings accounts, which may incur monthly fees if not maintained. On the other hand, flexi FDs don't have such requirements but may require an initial deposit amount that meets the bank's criteria for opening an account.