3 Important Tips To Earn The Most Out Of Your Fixed Deposit Investment

The world economy is currently undergoing a bit of a slump. While it has marginally come out from the 2008 stock market disaster, there hasn’t been a full recovery. As such cases are never too far from happening, a vast majority of of investors are taking conservative decisions particularly when it comes to safeguarding their hard-earned money.

In this article, you will find some of the most important tips if you want to earn the most out of your fixeddeposits.

1. Research All The Way

Fixed deposits are traditionally the safest investment option when compared to mutual funds or stock as the returns you get aren’t linked to the economic conditions. Ideally, an FD would get you returns of about 6% - 9% on your investment.

In order, for you to get the most money out of your fixed deposit you will need to do your due diligence to find the best offers. One way to do this would be to get in touch with a handful of top banks or NBFCs and get a quotation of the rates they offer. Once you have all the offers in hand, you can select a deal that gives you the best interest rate.

2. Split Your Fixed Deposits/Term Deposits

If the interest on your fixed deposits/Term Deposits earn more than Rs. 10,000 a year, they will be eligible for a Tax Deduction at Source (TDS), which can be up to 10%. In order for you to make sure the deduction doesn’t happen, you can split your deposits such that the total interest earned would not be more than Rs. 10,000 a year.

Doing so can also be advantageous for you because you wouldn’t have to withdraw your entire FD if and when a cash crunch arises. Instead, you can break one or two while others will keep getting you the predetermined interest like it used to.

However, an important aspect worth noting is that you will need to mention the FD earnings when you file your tax returns, unless you want the IT department to come knocking on your door for tax evasion.

3. Refrain From Making Regular Interest Withdrawals

Every FD you apply for provides you with a number of options: one, withdraw the interest every month or quarterly or let it rest and gain more interest. When such instances occur, choose the latter. This is because when you withdrawing the interests regularly, you will not get the benefit of your FD’s interest compounding.To tackle this situation, you can reinvest the earnings to let it earn much better returns.

Advantages of a Fixed Deposit Account

Many times you may have heard people advising you to invest your money in a FD account. So what is FD? Fixed Deposit or FD is a type of term deposit that gives you a fixed Deposit rate of interest until maturity. By investing in FDs you can save and earn money at the same time. It also offers a higher rate of interest compared to a regular savings account. Apart from this, there are other advantages of having a FD account.

Mentioned below are a few advantages of having a FD account:

• Assured Return – If you invest your money in a fixed deposit account, you are assured a return. You will earn interest on your deposited amount, but the rate of interest depends on the tenure you have chosen. Banks in India are offering around 7% to 8% interest on Fixed Deposits at present.
• Flexible Payment – FDs allow you to choose how you wish to receive interest. You can choose to be paid annually, monthly or during maturity.
• Flexible Tenures – Fixed Deposits have flexible tenures. You can open a FD account for as less as 7 days. The tenure options are not the same for every bank. Also, it is not mandatory for you to have an account with a particular bank to open a FD account with it.
• Helps during Emergency – During emergencies when you are in need of money, a FD can help you a lot. Many banks offer loans against Fixed Deposits. Up to 90% of the deposit can be availed as loan. Some banks allow partial withdrawals of FDs as well.
• Risk Management – Financial instruments such as mutual funds, gold, etc., may provide high returns, but are also very risky. To adjust this market risk, it becomes important to invest in debt instruments. FDs will help you manage this risk as the returns are fixed.
• Easy to Withdraw – You can withdraw the amount you have deposited in your FD account at any time. For premature withdrawals, banks may charge you a small penalty.
• Saving Habit – Fixed Deposits help people in developing a habit of saving money. When you invest a certain amount in FD, that amount cannot be used until you withdraw it or maturity.

These are some of the benefits of investing in fixed deposits. You can open a FD at any time and the application process is also very simple. Just make sure that you select the right tenure.

The Formula for Compound Interest Rate

Compound interest is the concept of earning higher interest rate. If you have an account that earns compound interest this means that the bank pays you interest on your principal sum of money, plus on the interest your account has already earned. This means that your interest earns you even more money as interest.

A compound interest account can gain you a lot more money than may expect when calculating with a simple interest rate. But to find out exactly how much more, you need to use a compound interest formula.

What is a Compound Interest Formula

A compound interest formula is the mathematical calculation of how your interest earnings would add to to give you the final sum total. It is a very important tool to track your current finances and plan your future investments. If you are contemplating the steps to a future financial venture such as getting a house or a car, the formula for compound interest rate will help you understand exactly how much you stand to gain through your bank account and you can then estimate how much of loan payment you can afford.

How do I calculate the compound interest formula?

FD Calculator

The formula for calculating compound interest is:

A = P (1 + r/n) (nt)

where

A = The money (including interest) you will accumulate after ‘n’ number of years. This is also the answer to the compound interest formula and calculates the future value your investment or loan.

P = The principal amount of money you invested initially.

r = The annual rate of interest. This information is to be entered as a decimal into the formula.

n = The number of times interest is compounded per year, or the number of times the interest is paid to your account.

t = The number of years the money has been invested for.

If you have the correct information for all the values in the formula, you will get the correct amount of money you will earn with this investment.

If you want to calculate only the compound interest you earn and not the entire amount (principal plus interest), you need to tweak the formula to subtract the initial principal amount you invested. Then the formula you are looking for becomes as below:

Total compounded interest = P (1 + r/n) (nt) – P

All the variables in this formula remains the same as in the original formula. And you get the sum of money you will have earned in the future.

The Benefits of Using the Compound Interest Formula

Besides the obvious benefit of learning how much interest you earn in future, compound interest calculation formula helps you make an investment in the first place.

For example, if you want to purchase a house sometime in the future, the compound interest rate formula will show you exactly how much money you need to invest, for how long, and at what interest rate in order to buy your dream house.

• The formula for compound interest shows that your earnings grow exponentially over time. The longer duration you invest your money for, the greater your overall earnings will be. You can use this compound interest formula to judge what your period of investment should be to earn a desired sum of money.
• Compound interest formula shows you exactly how large of an initial payment you need to make. A higher ‘P’ or initial investment will also lead to a greater income.
• The same exponential rule applies to the interest rate. As with all savings, the higher the interest rate, the more money you earn as interest.

Thus we see that by using the formula, you never have to step blindly into an investment.

The ‘Quarterly’ Compound Interest Formula

We often have the need to calculate the compound interest we get in quarterly measure, as most banks pay interest to your account on a quarterly basis. We can tweak the compound interest formula to our benefit in this case.

The compound interest formula is made up of different pieces, each representing a different component. We have the component ‘n’ which is the number of times interest is compounded within a financial the year. So if your interest is compounded quarterly, then the value of ‘n’ in the compound interest formula will be 4. Thus, there is no need to formulate a different formula for quarterly compound interest calculation.

By changing the value of ‘n’ you can use the compound interest formula to determine quarterly, bi-annually, monthly and yearly compound interest. Thus, this compound interest formula can help you calculate interest on any type of compound interest account you plan to open.

Compound Interest Formula is a Friend

Most mathematical equations looks intimidating, the compound interest formula is no exception. But you have all the correct details it is not difficult at all to use this formula to your advantage.

Using this formula, you will also be to compare the amount you would earn in a standard account to that in a compound interest account. The compound interest rate formula will let you see how the difference between how much the two accounts will earn for you.

Compound interest formula is a friend which is here to help you score up your earnings.

Secured credit card for building credit

There is a very old saying that goes “It takes money to make money.” This means that you need credit for building credit. You must learn responsible credit management if you wish to rebuild your bad credit or have zero credit history so far. Using secured credit cards for building credit can definitely prove to be the right decision for you.

Secured Credit Card:

The credit score that you get is determined by the credit history that you build over a long time. If you have a very strong history of making payments, you will get a great credit score. Experts have recommended that one must start with secured credit cards. You get approval for these cards easily. The secured credit cards can serve as the perfect starting point for you when you want to build credit.

Almost anyone can get approval for secured credit cards. The regular credit cards are all unsecured and do not require collateral that can be recovered by the creditor. However, in case of secured credit cards, collateral is required. This particular safety net allows individuals with no credit or bad credit an opportunity to get approval.

If you wish to avail a secured credit card, you must deposit a particular amount in the card issuer’s account. This amount, in turn, becomes the limit that you can spend using your secured credit card. Some secured credit cards have low deposit requirements and some have high deposit requirements. Choose the one that suits your needs.

Secured Sbi credit cards can be used like other regular or unsecured cards. The credit card issuer will keep your deposited amount in its account and will use it to cover losses, if any. A debit card and a secured credit card work in the exactly same manner. As long as the credit card issuer sends reports to credit bureaus, you keep building your credit. The issuer must send the reports to bureaus like Experian and Equifax.

Building credit with the help of secured credit cards:

After you get the secured credit card, you must use it for building revolving credit. Lenders will realise that you can handle credit responsibly if you establish a good payment history. However, do not spend too much using your credit card. Ensure that you only spend what you can repay in full at the end of the billing cycle. Ideally, the credit card usage should be below 30% of the total limit on the card.

For example, you can refuel using your credit card every month. This amount will be easy for you to repay and you also build credit. Paying off the entire debt at one go helps you to avoid interest charges.

Practicing patience and remaining dedicated to the entire process of credit building can prove to be challenging. If you want to see some real progress in scores, you will have to build a perfect payment history for a substantial period of time. There is no quick fix or short cut when it comes to credit building.

You can plan on advancing in the world of credit after you have worked towards building credit for a period of 6 to 12 months by establishing great payment history. You can easily apply for a regular credit card, provided to continue to make due payments on time. Getting a car loan can also help you in the credit building process. An auto loan acts an instalment credit. So, when you pay the instalments on time, your credit score goes up.

Bottom Line:

Credit building is of utmost importance if you wish to avail loans from banks or other lenders. Credit score is the first thing that lenders would wish to see before approving your loan request. Ensure that you spend within your limits and pay off your debt on time.

How to make the most of your Fixed Deposits

For a vast majority of Indians, Fixed Deposits was one of the few investment options available. Besides, they were relatively risk-free and would accumulate a small percentage of interest every month and was all in all the most sought after investment avenues.

Fast forward to 2017, where SIPs, ELSS, and countless other products have popped up with the promise of offering bigger and better returns. But, despite all their advantages, they are still connected to the market, making them a riskier proposition, especially considering the trigger-happy economies of the world right now.

In this article, we will talk about the best ways to make use of an FD. Curious to find out? Read on.

• Choose the right tenure

FixedDeposits are typically available for tenures ranging from 7 days to 10 years. The catch with these is that, longer tenure deposits often provide higher returns as well as benefits. But, when you enough money to open an FD, you should never be overly enthusiastic about the returns alone. Take you time and understand your financial requirements.
Say, for instance, you have a major expense planned for an occasion that is two years down the line. Make sure to open an FD that corresponds to that exact period. While at it, you can also consider special tenure FDs for 333 days and 666 days that banks offer when they are in need of immediate funds. Such schemes come with a marginally higher interest rate than regular FDs.

• Get the best payout option

FDs usually come with different payout options. For instance, you can choose to withdraw the interest your money earns on a monthly, quarterly, half-yearly and yearly basis, or let it accumulate so as to collect the principal + interest at the time of maturity. Choosing the reinvest the interest into the deposit will give you a considerably larger corpus after the tenure.

• Never go for premature withdrawal

You may already know that premature withdrawals are possible on fixed deposits, but what you might not know is that every time you do so, you will have to pay a penalty. Meaning, you are likely to lose whatever interest your money has accumulated. An alternative to this would be to split your amount and invest in multiple FDs for varying tenures. This will help you mobilise funds for emergencies without needing to pay any sort of penalties.

• Always go for a tax-saving FD

The entire reasoning behind going for an FD is to save money but your attempts are mooted if you are liable for tax deduction. For instance, FDs that offer returns of more than Rs.10,000 will be taxed depending on the investor’s tax slab. A way to beat this would be to submit Form 15 H/G to the bank. Note that these forms will not absolve you from paying tax for your returns and to mention the money in your IT returns. To skip paying tax on your FD altogether, you should invest in tax-saving FDs, which often come with lock-in periods.

Overall, FDs, like any other investment, can offer you good returns but only when you use the right strategy and following the aforementioned points will help you make the most out of your FD.

Benefits of Balance Transfer Cards

Balance transfers are a term almost every cardholder comes across. Whether it be during the time of application, being advertised as a benefit or as a promotional offer being pushed their way. While some cardholders may be well versed with the term, first time cardholders might find this term vague and confusing. Balance transfers are a way of managing overdue credit card balances accrued on other bank credit cards by transferring them to a new credit card. Doing so would grant the cardholder the ability to pay off the balance in installments over specific tenures at interest rates that are much lower. As a result, it is a great way of clearing out dues before compounding interest rates spiral the debt out of control.

But a balance transfer plan can do much more than stem the debt from overflowing. Below are ways in which a balance transfer enabled credit card can help a cardholder.

• Opens up more room for cardholder’s money: The balance transfer plans can work for people who have debt that they can afford to pay off. Debt transferred onto balance transfer cards don’t accrue high rates of interest for the tenure chosen. This allows cardholders to make minimum monthly payments on the debt and gives them more room with their cash to spend on other expenses. The low rates of interest mean that even though minimum monthly payments are being made, the debt will still get serviced. The money freed up can be used on more productive avenues such as investments or deposits into a high yield savings account. One thing to note when using this strategy is that the balance of the debt should be cleared as soon as possible once the balance transfer tenure expires. Balance transfer plans revert to original interest rates when the tenure is up and failing to clear the balance will begin accruing interest at higher rates undoing all the benefits gained from the strategy in the first place.
• Other Benefits: Balance transfer cards also come with a slew of ancillary benefits that can help a cardholder financially. Benefits include complimentary travel insurance policies and rental car insurance policies. They help save the cardholder the added expense of purchasing these policies separately. The balance transfer cards also come with a credit dashboard. This dashboard allows cardholders to monitor their credit score with every payment that they make and is a very helpful tool for those who have debts and have missed a few payments in the past.
• Protect credit scores: Using a credit card bill payment, cardholders can ensure they repair some of the damage caused to their credit score when they accrued the loan in the first place. The cards allow cardholders to pay off the debt quicker and easier through lower interest rates and can bring up the affected credit rating of the cardholder.

Things to look out for:

• They should be opted for if they have low transfer fees. Some cards might charge upwards of 5% for transferring balances which can eat away the benefits of having lower interest rates.
• Ancillary benefits such as complimentary insurance policies are not comprehensive and do not cover a wide range of claims.

Best avenues to invest in 2017 to get higher returns

The last quarter of 2016 saw one of the most landmark decision taken by an incumbent Prime Minister in the country’s 69-year history since its freedom. PM Narendra Modi, with inputs from the Finance Ministry, brought into effect the demonetisation of Rs.500 and Rs.1,000 notes. This move, although took the country into a near meltdown, has somewhat appeared to stabilise the economy for the long haul.

However, one of the prime effects of demonetisation was that avenues that were deemed profitable for investors lost their charm. In this article, we will talk about a few instruments you can invest in to get better returns for your money.

• Post Office Recurring Deposit

The age-old Indian post office has undergone a major paradigm shift over the last few years in a number of ways. Of the many, one of the things that stand out is the introduction of deposit schemes. These schemes offer good returns for investors and is almost matchable with fixed deposits of similar terms. At the time of writing this article, post office deposits offer 7.3% returns, which compounds quarterly, for a 5-year period. Read More

For instance, a regular Rs.100 investment will yield a return of Rs.7,250.50 returns once the scheme matures.

• Public Provident Fund (PPF)

Public Provident Funds (PPFs) has long been one of the most preferred investment avenues for a vast majority of risk-averse working professionals. These funds mature after a 15-year period and offers an opportunity to renew for 5 years every time from there on. Besides, PPF is also eligible for tax deduction under Section 80C of the Income Tax Act.

• Sukanya Samriddhi Account (SSA)

SSA is basically available for parents of a girl child, which enables them to invest so as to build a corpus to fund the education and other things relating to the girl. This account requires a minimum of Rs.1,000 to be opened and the guardian can add multiples of Rs.100 every time they want to add to the account. The account has an upper limit though, meaning parents can only invest a maximum of Rs.1.5 lakhs per calendar year. A benefit of this account is that it is available for tax deduction while the returns non-taxable. Also, the maximum interest such accounts offer stands at 8.5%

• National Savings Certificate

National Savings Certificate (NSC) is yet another save avenue that offers guaranteed returns. Currently, the returns offered stands at 8% for a five year term. An account can be opened for as less as Rs.100 while there is no upper limit to the amount that can be invested. An advantage of this fund is that you can use it as collateral for any loans.

These are some of the best investment options you can invest in if you are tired of fixed deposits and their falling interest rates.