Fixed Deposit vs. Recurring Deposit: What's the Difference?
Edited by Huma Saeed || By Sawaira Riaz || Published on November 1, 2023
A Fixed Deposit is a lump sum investment earning interest over a set period, while a Recurring Deposit involves periodic contributions earning interest over time.
Key Differences
A Fixed Deposit is a financial instrument where individuals place a lump sum of money with a bank or financial institution for a predetermined period. This sum earns interest over that specified duration. In contrast, a Recurring Deposit allows individuals to deposit a fixed sum at regular intervals, typically monthly, into an account that also accumulates interest.
Sawaira Riaz
Nov 01, 2023
In the case of a Fixed Deposit, the initial investment remains untouched until maturity, earning a fixed rate of interest. This means that after placing the deposit, no additional contributions are made. On the flip side, a Recurring Deposit requires consistent contributions over the term of the deposit, with the individual making regular deposits, facilitating a savings habit.
Sawaira Riaz
Nov 01, 2023
Interest rates for Fixed Deposits are generally higher compared to Recurring Deposits, given the lump sum nature of the investment. Recurring Deposits, however, offer flexibility, allowing individuals to save smaller amounts at regular intervals, making it suitable for those with consistent but lower monthly savings capacity.
Sawaira Riaz
Nov 01, 2023
Both Fixed Deposits and Recurring Deposits are favored for their low risk and assured returns. They serve different financial needs: Fixed Deposits are ideal for those with a sizeable amount ready for investment, while Recurring Deposits cater to those aiming to build savings over time.
Sawaira Riaz
Nov 01, 2023
Comparison Chart
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Maturity Amount Calculation
Based on single initial amount.
Based on total amount contributed over time.
Sara Rehman
Nov 01, 2023
Fixed Deposit and Recurring Deposit Definitions
Fixed Deposit
Fixed Deposits earn interest at a predetermined rate until maturity.
His Fixed Deposit earned him a 5% interest annually.
Sawaira Riaz
Oct 21, 2023
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Recurring Deposit
A Recurring Deposit is a savings tool requiring periodic contributions.
He set up a Recurring Deposit to save $100 every month.
Sawaira Riaz
Oct 21, 2023
Fixed Deposit
Fixed Deposits remain untouched until the end of the chosen term.
Once her money was in the Fixed Deposit, she couldn't access it for two years.
Sawaira Riaz
Oct 21, 2023
Recurring Deposit
Recurring Deposits generally have a fixed tenure and interest rate.
Their Recurring Deposit offered a 4.5% interest rate for a 2-year term.
Sawaira Riaz
Oct 21, 2023
Fixed Deposit
Fixed Deposits offer guaranteed returns on the invested amount.
Their Fixed Deposit assured them a return of $500 after a year.
Janet White
Oct 21, 2023
Recurring Deposit
Recurring Deposits promote a disciplined savings habit.
Starting a Recurring Deposit helped her save consistently.
Sawaira Riaz
Oct 21, 2023
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Fixed Deposit
Fixed Deposits are low-risk financial instruments.
For a safer option, he chose a Fixed Deposit over stocks.
Janet White
Oct 21, 2023
Recurring Deposit
Recurring Deposits earn interest on the accumulated amount.
The interest from their Recurring Deposit added to their savings.
Sawaira Riaz
Oct 21, 2023
Fixed Deposit
A Fixed Deposit is a one-time investment with a bank for a specific period.
She invested $10,000 in a Fixed Deposit for three years.
Sawaira Riaz
Oct 21, 2023
Recurring Deposit
Recurring Deposits facilitate building savings over time.
To save for their vacation, they opened a Recurring Deposit.
Sawaira Riaz
Oct 21, 2023
FAQs
Can I withdraw from my Fixed Deposit before its maturity?
Yes, but early withdrawal might lead to penalties or reduced interest.
Sawaira Riaz
Nov 01, 2023
What is a Fixed Deposit (FD)?
A Fixed Deposit is a savings account where money is deposited for a specified period and a fixed interest rate is earned.
Sawaira Riaz
Nov 01, 2023
Which typically has a higher interest rate, FD or RD?
FD usually offers slightly higher interest rates than RD.
Sara Rehman
Nov 01, 2023
How often do I contribute to a Recurring Deposit?
Typically, contributions to an RD are made monthly.
Aimie Carlson
Nov 01, 2023
Can I open an FD or RD for my child?
Yes, many banks offer FDs and RDs specifically designed for minors, operated by guardians.
Sawaira Riaz
Nov 01, 2023
Are both FD and RD safe investment options?
Yes, both are considered low-risk as they're often offered by reputed banks and financial institutions.
Aimie Carlson
Nov 01, 2023
Can I add more money to my Fixed Deposit after opening it?
No, FDs are one-time deposits, and you can't add to the initial amount.
Sawaira Riaz
Nov 01, 2023
How does a Recurring Deposit (RD) differ from FD?
RD involves regular deposits over a set period, while FD is a lump sum deposit earning interest till maturity.
Sawaira Riaz
Nov 01, 2023
Is the interest rate of my RD fixed or can it change over time?
RDs usually have a fixed interest rate for the tenure you choose.
Sawaira Riaz
Nov 01, 2023
What happens if I miss a monthly payment in my RD?
Missing an RD installment might result in penalties or reduced interest earnings.
Janet White
Nov 01, 2023
How is the interest calculated for FD and RD?
FD interest is typically compounded quarterly, while RD interest might be compounded every month.
Sara Rehman
Nov 01, 2023
Can I get a loan against my Fixed Deposit?
Yes, many banks allow loans against FDs, usually up to 80-90% of the deposit value.
Sawaira Riaz
Nov 01, 2023
What's the usual tenure for Fixed Deposits?
FD tenures can range from 7 days to 10 years, depending on the bank and country.
Janet White
Nov 01, 2023
Can I convert my FD into an RD or vice-versa?
No, once opened, FDs and RDs can't be converted. However, you can close one and start the other with the received amount.
Aimie Carlson
Nov 01, 2023
Do I have to pay tax on the interest earned from FD and RD?
Yes, interest earnings might be taxable based on your country's tax laws and your income bracket.
Sawaira Riaz
Nov 01, 2023
Are there any additional benefits for senior citizens with FDs and RDs?
Many banks offer higher interest rates for senior citizens on both FDs and RDs.
Harlon Moss
Nov 01, 2023
What happens to my FD if I don't claim it after maturity?
The FD might be renewed automatically, or the amount might lie with the bank earning minimal or no interest.
Sawaira Riaz
Nov 01, 2023
Can the maturity date of my RD be extended?
Once an RD is opened, its tenure is fixed, but you can start a new RD after the current one matures.
Sawaira Riaz
Nov 01, 2023
Can I have a nominee for my Recurring Deposit?
Yes, you can appoint a nominee to claim the RD amount in case of unforeseen circumstances.
Sara Rehman
Nov 01, 2023
Do FDs and RDs have a minimum deposit requirement?
Yes, but the amount varies among banks and the specific FD or RD scheme.
Sawaira Riaz
Nov 01, 2023
About Author
Written by
Sawaira RiazSawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Huma SaeedHuma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.
