Why Choose Fixed Deposits over Savings Accounts

Posted in Investment Tips By Sajhyadri Chattopadhyay -
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Ever wondered where your money could do more for you instead of just lying idle? Fixed Deposits (FDs) or savings accounts – which financial powerhouse have you been looking for? Join us as we decode the magic behind these two financial tools. Let's embark on a journey to unravel why fixed deposits stand tall, offering a robust alternative to the conventional Savings Account. Buckle up as we explore the features and benefits, providing you with the roadmap to a more financially secure future. 

Where to park your money? Here are some reasons why you might choose fixed deposits over savings accounts – 

Standout Features of Fixed Deposits

  • Higher Interest Rates:

FDs generally offer higher interest rates compared to savings accounts. The interest rate on FDs is fixed at the time of investment, providing you with a known and predictable return. In contrast, savings account interest rates are typically lower and may fluctuate based on market conditions. 

  • Stability and Predictability:

FDs provide stability and predictability in terms of returns. The interest rate is locked in for the entire tenure of the FD, ensuring that you know exactly how much interest you will earn at the end of the investment period. This can be beneficial for individuals who prefer a fixed and assured return on their investment. 

  • Fixed Tenure:

FDs have a fixed tenure, which means your money is invested for a specific period (ranging from a few days to several years). This fixed tenure can be advantageous for those who want to keep their funds locked in for a predetermined period without the temptation of easy withdrawal, promoting disciplined savings. 

  • Discourages Impulsive Spending:

Since FDs have a lock-in period, they discourage impulsive spending. In contrast, money in a savings account is readily accessible, which may lead to temptation to spend. FDs help individuals maintain financial discipline by imposing a penalty for premature withdrawals. 

  • Variety of Tenures and Options:

FDs offer a variety of tenures to suit different needs. You can choose a short-term or long-term FD based on your financial goals. Additionally, financial institutions may offer special FDs with features such as monthly interest payouts or the option to reinvest the interest. 

  • Guaranteed Returns:

FDs offer guaranteed returns, as the interest rate is fixed at the time of investment. This can be particularly attractive in a low-interest-rate environment where the returns on other investments may be more uncertain. 

  • Suitable for Goal-based Savings:

FDs are suitable for goal-based savings where you have a specific financial goal in mind, such as buying a house, funding education, or planning for retirement. The fixed returns and predetermined tenure can help align your savings strategy with your financial goals. 

Top marks! But how do savings accounts perform in terms of these very parameters? Let's find out. 

Features of Savings Accounts

  • Lower Interest Rates:

Savings accounts generally offer lower interest rates compared to FDs. The interest rates on savings accounts are often variable and subject to change, and they tend to be lower than the fixed rates offered on FDs. This can result in lower returns on the money held in a savings account. 

  • Uncertain Returns:

The returns on savings accounts are often less predictable due to variable interest rates. As economic conditions change, the interest rates on savings accounts may fluctuate, leading to uncertainty regarding the total interest earned over time. 

  • Lack of Fixed Tenure:

Savings accounts do not have a fixed tenure. While this provides liquidity and easy access to funds, it may also lead to impulsive spending. The absence of a lock-in period means that there is no commitment to keep the money invested for a specific duration.  

  • Encourages Impulsive Spending:

The easy accessibility of funds in a savings account may encourage impulsive spending. Since there is no penalty for withdrawing money from a savings account, individuals may find it more tempting to dip into their savings for non-essential expenses. 

  • Limited Variety of Options:

Savings accounts typically offer a straightforward savings option with limited variations. While some accounts may provide additional features like overdraft facilities or linked investment products, they generally lack the variety of tenures and options available with FDs. 

  • Variable Returns:

Savings account interest rates can vary across banks and may change based on economic conditions. This variability can lead to fluctuations in the overall returns on your savings account balance, making it challenging to plan for future financial goals. 

  • Not Ideal for Goal-based Savings: 

While savings accounts are suitable for maintaining liquidity and covering daily expenses, they may not be the ideal choice for goal-based savings. The variable interest rates and easy access to funds make it less conducive to disciplined, long-term savings for specific financial objectives. 

In summary, while savings accounts provide liquidity and easy access to funds, they may not offer the same level of stability, predictability, and goal-oriented features as fixed deposits. 


FDs, with their fixed interest rates, fixed tenures, and penalties for early withdrawals, can be a more suitable option for individuals looking to secure stable returns and meet specific financial goals over a defined period. In the tug-of-war between fixed deposits and savings accounts, the scales tip in favour of FDs. Their higher interest rates, disciplined approach, and security make them the wiser choice. So, take the plunge for a financially fortified future. Book an FD on Bajaj Markets today! 

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