When seeking low-risk investment options, both demand deposits (DDs) and fixed deposits (FDs) emerge as potential options. FDs are time-bound investments which offer higher interest rates compared to savings accounts, especially for longer tenors. DDs allow penalty-free withdrawals at any time, but offer lower interest rates compared to FDs. 


However, discerning the nuances between these seemingly similar options becomes crucial for optimising returns and aligning with your financial goals.

Differences Between Fixed Deposit and Demand Deposit

Here are the major distinguishing factors between fixed deposits and demand deposits:


Fixed Deposits

Demand Deposits


Deposits are held for a predetermined tenor at a fixed interest rate 

Funds can be withdrawn at any time without prior notice 


Suitable for long-term savings goals

Ideal for short-term cash management needs.

Interest Rates

Tend to offer comparatively higher interest rates  

Offers lower interest rates in exchange for liquidity


Can range from 7 day to 10 years

No such requirements as deposits are available for regular use


Regular FD, senior citizens FD, Tax saving FD, Corporate FD and more. 

Savings accounts, checking accounts, and money market accounts


Tax saving FDs can help save taxes up to ₹1.5 Lakhs u/s  80C of the Income Tax Act, 1961

No taxes applicable on DDs


Low liquidity; premature withdrawal available, subject to penalties 

Highly liquid; no penalties or charges incurred for withdrawal 


Low flexibility; certain FDs come with a lock-in period 

Highly flexible; funds can be added or withdrawn anytime

In conclusion, selecting between a fixed deposit and demand deposit hinges on your financial goals and liquidity preferences. DDs offer easy access to funds but lower interest rates, while fixed deposits provide higher rates with limited access. Consider your objectives, risk tolerance, and liquidity requirements to make the best decision for your financial well-being.


The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

Frequently Asked Questions

Which one offers higher interest rates, demand deposit or fixed deposit?

FDs offer higher interest rates than DDs, while the latter provides better access to liquidity without needing prior notice for fund withdrawal.

Can I convert a demand deposit into a fixed deposit?

Yes. Converting a demand deposit  to a fixed deposit is often an option. While most banks allow this conversion, keep the following in mind: 

  • Funds are inaccessible until the FD matures

  • Higher interest rates are offered on FDs 

  • Fees and minimum amounts may apply

Which is more accessible: demand or fixed deposits?

Unlike FDs, DDs allow investors to withdraw money at any time without advance notice.

Which earns higher interest between FD and DD?

Fixed deposits generally offer higher rates, as your money is locked-in. Demand deposits have lower rates due to easy access.

Is it safe to keep large amounts in DDs?

Generally, yes. Most have deposit insurance coverage but confirm limits with your bank.

Which is better for long-term savings goals between fixed deposit and demand demand?

FDs provide better returns for long-term goals due to higher interest rates. However, consider your accessibility needs before choosing.

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