All You Need To Know About The Features Of An RD Or A Recurring Deposit Account

RD offers you a fixed interest on the amount that is invested with specific frequency till the term that has already been predetermined or upon maturity. At the end of the term the amount upon maturity which also would happen to be the invested capital is paid along with the remaining and accumulated interest.

The following are the main features of an RD account

Recurring deposit schemes are made in order to inculcate the habit of savings amongst public; the lowest amount that can be deposited in an RD account varies from one bank to another, and however the amount can be as small as Rs 10.

The minimum period of deposit stars from a meagre six months and the maximum tenure till which a customer can deposit his money is 10 years. The rate of interest is equal to that offered for a fixed deposit and is hence higher than any other savings scheme. Premature and midterm withdrawals are not allowed in a recurring deposit account and this feature is semblative to the feature in fixed deposits. If that happens the depositor has to pay a minimal fine for premature withdrawal. In a recurring deposit account the depositor can let his savings in the account and at the same time can take a loan on the amount by using it as collateral. About 80% to 90% of the amount can be given to the RD account holder. The RD account can be funded from time to time according to the standing instructions which are actually the instructions that have been given by the customer to the bank to credit the RD account every month from his or her savings bank account.

Duration of the RD account

The customers are free to choose the tenure. They can make their calculations and choose the tenure which suits best. In an RD account the compounding of the interest will be done on a quarterly basis. The deposit term begins with a minimum period of 6 months and it goes up to a period of 10 years. However the minimum period for an RD account depends on the banks as well.

Eligibility for holding a Recurring deposit account

Most Indian banks offer resident Indians and Hindu undivided families the opportunity to open an RD with them. What’s more some banks even offer RD schemes for children and on this case the minors too are eligible to open an RD account but of course they do need the supervision of their guardians so that the finances can be taken care of.

These are some of the points to be kept in mind about RD accounts.

What are the financial products you need to invest in to secure your future?

If you have started to earn and contented about your finances, there are several reasons why you should be concerned. In failing to invest in the appropriate investments and policies, plenty of individuals will lose out several financial advantages, in terms of better premium rates and tax exemptions.

However, that is not all there to know about it. You will feel the pinch when you reach your 40’s, where lack of savings and proper investments will lead to financial vulnerability as your expenses will rise. To avoid such a potential situation, here are a few financial products you need to invest in:

Life insurance: The first product you need to invest in is life insurance, especially if you have dependants. With a life insurance policy in place, your family will be financially protected, in the event of your demise. For the best and financially flexible insurance option, you can opt for term insurance. To ensure that your family gets enough funds to compensate for the loss of income through your death, opt for a high sum. You can calculate the sum based on your requirements, potential rise in prices, day to day expenses and goal amounts.

Health insurance: Afterlife insurance, your health insurance is the next important investment. Statistics have indicated that India’s medical inflation is higher than the global average. No debt investment will pay your more than this figure. Therefore, once you have begun paying for your loans, you will need a financial protection against hefty medical bills. While health insurance will protect you during a medical emergency, in the long run it will help protect your savings in the long run. Opt for an insured sum that is enough for you and your family, based on your lifestyle, health and family medical history.

Recurring deposit: You need to create a recurring depositwith your bank, especially in the bank where your income is being deposited. In this way, you can end up saving each month. This will also stop you from spending everything that you are c earning, leading to a steady saving. Additionally, it will help you manage your budget better, allowing you to invest in other investment options. You can even increase the amount you invest in each consecutive year.

PPF account: Like the recurring deposit, the PPF will give you plenty of benefits on investment, especially when it comes to tax benefits. You can first claim deductions under Section 80C for contributions. Secondly, the interest you earn on income is tax-free. Lastly, the lump sum you receive at the end of the tenure is also tax-free. All in all, by investing an amount of Rs. 1.5 lakh per year, you can save at most roughly Rs. 47.86 lakhs over a period of 15 years.
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