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  • Advantages of Investing in Recurring Deposits

    Recurring Deposit is one of the most preferred investment schemes available in India. Risk averse investors looking for a promising investment scheme with good returns choose Recurring Deposit because it is simple and is a straightforward financial product. Read on to find more about the advantages of investing in a Recurring Deposit scheme in India.

    What is a Recurring Deposit and How Does It Work?

    In a recurring deposit scheme, the investor deposits a set amount every month over a predefined tenure which generally varies between one year to five years. The recurring deposit scheme has one major differentiating point when compared to fixed deposits - in a fixed deposit scheme, the investor has to deposit a lump sum once and leave it untouched for a period of time. So, people who do not have a lump sum or people who are looking to invest a set amount every month usually prefer Recurring Deposits. The principal amount deposited is returned at the end of tenure along with the interest. Normally, the interest is calculated on a quarterly compounding basis for recurring deposits.

    How to Open a Recurring Deposit?

    All major private and public banks in India offer Recurring Deposit products for their customers. Also, India Post offers a very popular recurring deposit scheme in the name of Post office Recurring Deposit scheme. Follow the steps given below to open a recurring deposit account.

    • If you already have an account with the bank that you wish to open a Recurring Deposit with, you can contact the nearest bank branch or the bank’s customer service cell to open a recurring deposit account.
    • If you wish to open a recurring deposit account in a bank with you do not have an account with, you will have to contact the nearest branch and submit an application form. Also, you will have to submit basic KYC documents to open an account.
    • At the time of opening a recurring deposit account, the tenure as well as the monthly due amount (deposit amount) should be decided. Monthly payments for Recurring Deposits can be done online using ECS, online banking or fund transfer.

    Advantages of Recurring Deposits

    With banks offering an attractive interest rate for Recurring Deposit products, customers can gain the maximum out of their investments. Here are some of the advantages that come with Recurring Deposits.

    • Useful for Planning Short Term Goals

      Investing in a Recurring Deposit is completely risk free and gives guaranteed returns. Investing in Mutual Funds and Stocks might not be a safe option if you have short term investment goals. Because of this nature of RD, investors contemplating on short term goals in a time span of 1 to 3 years choose to involve in Recurring Deposit. Consider the situations given below, Recurring Deposit might just be the right financial product if you are planning to tackle short term situations that require financial assistance.

      • Yearly education fee for your kids
      • If you are employed, higher education costs
      • If you own a home, furnishing and renovation costs
      • Overseas vacation
      • Managing marriage expenses
    • Online Recurring Deposit Features

      With almost all popular banks offering online Recurring Deposit features, investing has just become easier. The customer can deposit money in Recurring Deposit account, close the RD account, open another RD, update information, view transactions, deposit details and do much more online. Think about making an investment and earning interest without even having to leave your home - investing in a Recurring Deposit is as easy as this.

    • Recurring Deposit Interest Rates

      Recurring Deposit interest rates depend on the tenure and deposit amount. In most cases, the Recurring Deposit interest rate is very similar to that of fixed deposits. Interest rates for RD vary from 7.25% to 9% depending on the bank and the plan chosen by the customer. Also, many banks offer higher interest rates for senior citizens. You can also use a RD calculator to find how much interest you will accumulate for the deposit amount, interest rate and tenure.

    • Ease of Investment

      In a Recurring Deposit scheme, the investor has to deposit a fixed sum every month which will build up a savings discipline. For salaried customers, it will be easier to set aside a particular amount every month as savings and for this, Recurring Deposit is the best option. Also, RD schemes come with guaranteed returns and the rate of interest for RD is locked in which will protect the investor from interest rate swings.

    • Flexible Recurring Deposit

      Some banks offer flexible Recurring Deposit schemes where the investor will not be penalized if the amount is not deposited during a particular month. Also, in a flexible RD scheme, you will be able to withdraw the amount from your RD account anytime you want.

    Disadvantages of Recurring Deposits

    A financial product comes with benefits, but will always have some flaws. Let us take a look at certain things that may be slightly discouraging, when you are taking recurring deposit as your saving instrument:

    1. Liquidity: When you deposit the money in an RD, you will never have the privilege to withdraw any part of the money until the term of the deposit is over. Hence, if you are looking for an easy liquidity instrument, recurring deposits are an absolute bad idea. On the other hand, if you want to discipline your savings this disadvantage may work to your benefit.
    2. Rate of Interest: The interest rate that you earn on recurring deposit is much lower that regular fixed deposit schemes, since your deposits are being made in small installments and not as a whole chunk.
    3. Stringent Monthly Installments: It is not possible in the case of recurring deposits to be able to change your deposit amount, regardless of your financial situation at the moment. With a fixed amount for investment each month, someone with chances of extra or less funds for the deposit should be discouraged from opting for this product.
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    Customer Reviews

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      "Approachable service"
      HDFC BANK
      0.5 4.0/5 "Great!"
      The rate of interest with the bank is 9.1 %. As the rate of interest was high i thought not to take the loan for now from HDFC Bank. The service executive gave me good response at the time of the application. The follow up was also good and comfortable.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 18, 2017
    • HDFC Bank Saving Account
      "Professional services"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
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      , pune
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    • Fullerton Personal Loan
      "Average Service"
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      0.5 3.0/5 "Satisfactory"
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    • Bank Bazaar Car Loan
      "Good website"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
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      "Happy with the services"
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      0.5 5.0/5 "Blown Away!"
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      , pune
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      , mumbai
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    • Bank Bazaar Credit Card
      "Its Good"
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      0.5 5.0/5 "Blown Away!"
      When I got good credit card service from Bank Bazaar, they helped and guided through out the process. I am satisfied with them, the website is easy to navigate for comparing the financial offers, which is available in the market its very good.
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      , mumbai
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    • HDFC Bank Credit Card
      "Easy to hold"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I am holding a credit card with HDFC. They provide reward points for every purchase. satisfied with the service. The customer service and response with the bank is comfortable. I am totally happy with the credit card with HDFC. I can recommend the card.
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      , mumbai
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    • HSBC Bank Credit Card
      "Easy to hold"
      HSBC BANK
      0.5 5.0/5 "Blown Away!"
      I am holding a credit card with HSBC. They provide reward points for every purchase. satisfied with the service. The customer service and response with the bank is comfortable. I am totally happy with the credit card with HSBC. I can recommend the card.
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      , mumbai
      Reviewed on Nov 18, 2017
    • HDFC Bank Credit Card
      "Nice experience"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      HDFC bank is excellent in the offers on the credit card. The customer services are professional, and they communicate on time and inform me the details of the offers I am eligible for. There are no charges related to the card and my transactions are always clear.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 18, 2017
    • HSBC Bank Credit Card
      "Its Good"
      HSBC BANK
      0.5 5.0/5 "Blown Away!"
      I thought to go with HSBC because my friend is holding the same credit card. Hence I am impressed with that card, they gave me satisfactory credit limit. Their service is goo they dispatched my credit card without any hassles. I am fine with the notification.
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      , mumbai
      Reviewed on Nov 18, 2017
    • HDFC Bank Car Loan
      "Rate of intrest was high"
      HDFC BANK
      0.5 2.0/5 "Expected more"
      The rate of interest with the bank is very high. The approved rate of interest was 9.75% which was not acceptable. The pre-closure and part payment was charging too high with HDFC.The customer service and response provided by HDFC Bank was very much satisfactory.
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      , coimbatore
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    • LIC Life Insurance
      "Best policy to use"
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      0.5 5.0/5 "Blown Away!"
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      , hyderabad
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    • review All Products
      "Excellent"
      PUNJAB NATIONAL BANK
      0.5 5.0/5 "Blown Away!"
      I am using Punjab National Bank service for past 2 years. I am satisfied with the customer service and response. I need to maintain a minimum balance. I use domestic debit card. ATM facilities are sufficient and convenient. I am using net banking, its good.
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      , jaipur
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      "Very good services & response"
      SBI CARDS
      0.5 5.0/5 "Blown Away!"
      State Bank of India is good on the credit card offers. The credit limit is to my satisfaction and the transactions are smooth and there is no decline in the transactions. The benefits are good and the rewards are also useful. The charges are also normal.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 18, 2017
    • ICICI Bank Saving Account
      "Excellent Banking"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
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      , jaipur
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    • Bank Bazaar Car Loan
      "Professional experience"
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      0.5 4.0/5 "Great!"
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      , coimbatore
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    • Bank Bazaar Credit Card
      "Excellent"
      KOTAK MAHINDRA BANK
      0.5 5.0/5 "Blown Away!"
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      , jaipur
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    • ICICI Bank Credit Card
      "Best card to use"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
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      , hyderabad
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    • Kotak Credit Card
      "Excellent"
      KOTAK MAHINDRA BANK
      0.5 5.0/5 "Blown Away!"
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      , jaipur
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