7 Reasons Why Fixed Deposits Are Better Than Savings Accounts

There used to be a time when putting money in a Savings Account was not an activity that would be associated with earning interest. If you discussed investing a large amount of money with friends, they would tell you, “Put that money in a Fixed Deposit (FD) and you can live off the interest.” It is interesting to note that such statements are never made for a Savings Bank Account and there is a reason for it.

Additional Reading: 5 Reasons To Open A Fixed Deposit Today

Earlier, interest rates offered by banks on Savings Accounts used to be regulated and was fixed at 4% per annum but now they have been deregulated. This means banks can now decide on what interest rates they wish to offer for Savings Accounts.

If you’re curious about the interest rates banks are offering on Savings Accounts, here’s what a few major banks in India are offering.

Savings Account Interest Rates 2017

Bank Name	Interest Rate
RBL Bank	Daily balance above Rs. 10 lakhs – 7.1% p.a. Daily balance above Rs. 1 lakh – 6.1 % p.a. Daily balance up to Rs.1 lakh – 5.1 % p.a.
Kotak Mahindra Bank	6% p.a.
Yes Bank	6% p.a. on account balances below Rs.1 crore
Bandhan Bank	Daily balance up to Rs.1 lakh. Interest paid half yearly – 4. 25% p.a. Daily balance above Rs.1 lakh. Interest paid half yearly – 5% p.a.
Axis Bank	4% p.a.
Lakshmi Vilas Bank	Daily balance up to Rs.5 lakhs – 5% p.a. Above Rs.5 lakhs – 6% p.a.
IndusInd Bank	Daily balance up to Rs.1 lakh – 4% p.a. Daily balance above Rs.1 lakh but less than Rs.10 lakhs – 5% p.a. Daily balance above Rs.10 lakhs – 6% p.a.
HDFC Bank	4% p.a.
ICICI Bank	4% p.a.

So, what should you go in for? A Savings Account or a Fixed Deposit? Before we get into that, let’s first see what the differences between these two are.

Difference between a Fixed Deposit and Savings Account

Savings Account	Fixed Deposit
The amount you can put into the account is not limited.	The amount that can be put in an FD depends on the rules of the bank. Some banks may not have upper limits while others will.
There is no fixed tenor for a Savings Account.	FDs have fixed tenors ranging from 7 days to 10 years.
Interest rates are not fixed for the duration the Savings Account is held for.	All term deposits come with a fixed rate of interest that is specific to the duration of the FD.
Interest rates are independent of the period for which funds are held, the amount deposited or age of account holder.	Interest rates depend on the amount deposited, tenure chosen and the age of the depositor (senior citizens usually get special rates)
There is no special interest for senior citizens.	Most banks will offer senior citizens a higher rate of interest.
There is no TDS charged on interest earned on a Savings Account.	Interest earned on an FD is subject to TDS based on certain conditions.
Interest is calculated on a daily basis.	Interest is calculated on a quarterly basis and can be credited to a specified account. Some banks may offer monthly interest credits but at discounted rates.
Savings Bank Accounts don’t have types or variations.	Banks offer different schemes for Fixed Deposits, each of which may have its own features.
These accounts don’t offer tax savings.	Most banks offer tax-saving Fixed Deposits meant to help customers save on income tax under Section 80C.
Savings Accounts don’t have lock-in periods.	Fixed Deposits that are made for tax savings come with lock-in periods of a min of 5 years.
Savings Accounts can’t be used to secure loans.	Fixed Deposits, except tax saving FDs, can be used to secure loans. The amount that can be taken as a loan will depend on the bank’s policies.

Should you opt for an FD or a Savings Account?

Here are seven reasons why a Fixed Deposit is better.

They want to go in for a Fixed Deposit is generally defined by the individual needs of depositors. Let’s highlight a few instances where FDs make more sense than holding money in a Savings Account.

1. If you have a substantial amount of money kept in a Savings Account, then you need to put it to work. With a short-term deposit of just a few months, you might earn more than what you could if the money is left in a Savings Account.
2. Interest rates offered on FDs are higher than those offered on Savings Accounts so helping your money grow in a term deposit is the more lucrative option.
3. Let’s say you have a large sum of cash which you intend to use to buy something in a month or two. If you put that money in an FD, it could earn more than what you would get from a Savings Account in a couple of months.
4. If you are above the age of 60 years, you may qualify for the senior-citizen interest rate which can be as much as 0.5% above the prescribed rates.
5. If you don’t have a credit history and want to create one, you can use an FD as collateral to secure the loan.
6. You can even use a Fixed Deposit to get a Credit Card. Some banks will charge considerably lower interest rates for Credit Cards secured by FDs.
7. If you, as a depositor, are looking for tax benefits then FDs are the ones to will give it to you via their tax-saving schemes.

We’ve put together a list of Fixed Deposit interest rates in 2017 being offered by a few major banks in India to make your decision easier:

Fixed Deposit Interest Rates 2017

Bank Name	Interest Rate
RBL Bank	< 1 year – 7.1% >=1 to 2 years – 7.2% >=2 to 3 years – 7.3% 3 to <=5 years – 7.2%
Kotak Bank	< 1 year – 6.6% >=1 to 2 years – 6.8.% >=2 to 3 years – 6.6% 3 to <=5 years – 6.25%
Yes Bank	< 1 year – 6.75% >=1 to 2 years – 6.75% >=2 to 3 years – 6.75% 3 to <=5 years – 6.75%
Bandhan Bank	< 1 year – 6.9% >=1 to 2 years – 7.15% >=2 to 3 years – 6.8% 3 to <=5 years – 6.4%
Axis Bank	< 1 year – 6.5% >=1 to 2 years – 6.85% >=2 to 3 years – 6.25% 3 to <=5 years – 6.25%
Lakshmi Vilas Bank	< 1 year – 6.75% >=1 to 2 years – 6.9% >=2 to 3 years – 7% 3 to <=5 years – 7%
IndusInd Bank	< 1 year – 6.75% >=1 to 2 years – 6.85% >=2 to 3 years – 6.75% 3 to <=5 years – 6.5%
HDFC Bank	< 1 year – 6.25% >=1 to 2 years – 6.75% >=2 to 3 years – 6% 3 to <=5 years – 6%
ICICI Bank	< 1 year – 6.5% >=1 to 2 years – 6.75% >=2 to 3 years – 6.5% 3 to <=5 years – 6.5%

Check This: Fixed Deposit Calculator

The simplest answer to the question of Savings Account or Fixed Deposit would be, “When in doubt, go for an FD!”