Difference Between Fixed Deposit and Recurring Deposit

When it comes to savings, every person wants to earn high returns on its deposits. Deciding which banking product is best for us is a tough task. There are various deposit schemes started by banks in which a person can invest money as per his convenience. Fixed Deposit or FD is one of those scheme, in which the user invests his money for a long time in a lump sum. Similarly, Recurring Deposit or RD is a kind of bank account in which the customer has to deposit a fixed sum of money in short intervals for a long time.

In recurring deposit a certain amount is needed to be deposited with the bank at periodic intervals for a particular period. It aims at inculcating the habit of saving money among low or iddle income class. On the other hand, in fixed deposit, the money is repaid on fixed maturity date. There is a slight difference between Fixed Deposit and Recurring Deposit, which you can see in this article.

Content: Fixed Deposit Vs Recurring Deposit

1. Comparison Chart
2. Definition
3. Key Differences
4. Video
5. Interest Rate
6. Conclusion

Comparison Chart

Basis for Comparison	Fixed Deposit	Recurring Deposit
Meaning	A deposit scheme in which a particular sum of money is invested with the bank for a fixed period, is known as Fixed Deposit.	A financial product in which money is deposited to a particular account at regular intervals for a long time is Recurring Deposit.
Investment	Lump sum	Installments
Minimum amount to be deposited	Slightly high	Nominal
Returns	Comparatively high	Low
Advantage	It enables the depositor to earn higher returns on his funds.	It develops the habit of saving in depositor.

Definition of Fixed Deposit

Fixed Deposit, shortly known as FD, is a kind of term deposit in which a particular sum of money is deposited in the bank or financial institution at the time of opening the account, for a long time. The scheme carries interest, whose rate depends on the amount invested, term and norms of the bank in which the account is opened. At the expiry of the stipulated term, the account holder gets the entire amount, i.e. principal and interest on the deposit made by him for so long.

In this financial instrument, the depositor has to invest the money only once in a lump sum, when the account is opened, and it is repaid back to him along with the interest once the specified time is over. That is why it is known as Fixed Deposit account. After depositing the money, the customer cannot withdraw the money from the account, however, in the case of any urgency of funds the account holder is allowed to close the account to withdraw the same, but subject to certain conditions.

Moreover, as it is a one-time investment, if the depositor further wants to deposit the money, he has to open up an individual account for the same, because no additions to the deposited amount are allowed. At the time of depositing the money, the depositor is given a receipt which he has to present at the time of maturity to get the money.

Definition of Recurring Deposit

The deposit scheme in which the depositor is allowed to deposit a specified sum of money at regular intervals, in the bank or financial institution on a particular date for a long time is known as Recurring Deposit. It is also a kind of term deposit on which the bank gives interest on the savings at a particular rate on the basis of compound interest. The rate of interest varies from, bank to bank. The whole amount is repaid along with accumulated interest on it, at the expiry of the term for which it is deposited.

The deposit is made from time to time at regular intervals, in this product. Due to the repeated occurrence of deposits, it is named as Recurring Deposit. This account is opened for specific purposes, which are going to take place in future like purchasing of land, car or home, etc. Once the stipulated time is over the depositor does not have to make further investment in the account. The account holder can withdraw the amount after the expiry of the term. Moreover, withdrawal of the amount in the middle of the term is not permissible, although a depositor can close the account if he is in need of funds.

The product is beneficial to those who want to save periodically, up to a specified term. They do not have to deposit a huge amount for opening the account, i.e. a nominal amount is required.

Video: Fixed Deposit Vs Recurring Deposit

Interest Rate

Interest Rate on fixed deposits differ on the basis of the maturity period, but the rates are uniform for all the customers. Although, if the deposit value is more than the cut-off value and the deposit is made by the senior citizen(>60 years) then a high rate of interest is paid on their deposits, on the specified point basis. On the other hand, interest rate on recurring deposit is same as the rate applied to fixed deposit for the same period.

Conclusion

There are many differences between fixed deposit and recurring deposit. But, there are many similarities in them like the maximum tenure of Fixed Deposit and Recurring Deposit is ten years. However, the minimum term varies from bank to bank. Tax Deducted at Source is applicable on both the schemes. In the same way, the bank gives loan facility, on both the schemes up to a certain percentage of the amount standing to the credit of their respective accounts.