Understanding the benefits of flexi fixed deposits for Indian savers
Flexi fixed deposits combine the liquidity of a savings account with the high interest rates of a fixed deposit. They offer a versatile saving instrument for Indian savers. This financial tool allows you to enjoy the best of both worlds. It automatically transfers excess funds from your savings account to a fixed deposit. This ensures higher interest earnings without compromising on fund accessibility.
Understanding flexi FD mechanism
In a flexi fixed deposit scheme, when the balance in your savings account exceeds a certain threshold, the surplus automatically transfers to a fixed deposit. It earns higher interest rates, typically ranging from three to seven percent. This transfer threshold and interest rates vary across banks. They are designed to optimize returns on idle funds in your savings account.
Withdrawal without penalty
A significant advantage of flexi FDs is the penalty-free withdrawal feature. In an urgent need of funds, you can withdraw from the fixed deposit part without facing any penalty charges. This benefit ensures your money not only grows at an optimal rate when saved but also stays readily available for emergencies or unforeseen expenses. It provides peace of mind and financial flexibility.
Auto-renewal feature
Flexi fixed deposits often come with an auto-renewal feature. Upon maturity, both the principal and the interest earned are automatically reinvested into a new fixed deposit. This process ensures that your investment continues to earn competitive interest rates without any action required on your part. It's important to note that terms and conditions regarding renewal policies may vary by bank.
Maximizing returns with flexi FDs
To maximize returns on a flexi FD, it's advisable to maintain an optimal balance in your savings account. Have enough for regular expenses and some contingency. Allow excess funds to earn higher interest in the fixed deposit. Monitoring and managing this balance can significantly enhance overall returns. This approach is better than leaving large sums idle in a low-interest savings account.
