Fixed deposits, also known as FD, have long been the first choice of investors who want to grow their savings in a safe and reliable manner. With the introduction of callable and non-callable FD options from banks or other financial institutions, investors are getting the opportunity to make more strategic investments as per their needs and goals. But before investing, it is also important to understand which of these two is the better choice.
What is callable bank FD?
Callable fixed deposits, also known as ordinary FDs, allow investors to withdraw part or the entire amount before the maturity date. However, banks and NBFCs may impose a fine or penalty on premature withdrawal. This flexibility is the specialty of this scheme.
Features and Benefits of Callable FD
The biggest feature of callable FD is that if needed, money can be withdrawn before maturity. Even though there is a penalty on this, it acts as a safety net against unexpected financial needs. The investment period and amount in callable FD can be selected as per your financial plan. Although the interest rates on these may be slightly lower, the flexibility compensates for it. The minimum investment amount in these FDs is relatively low, due to which even small investors can easily invest in them and diversify their portfolio.
What is non callable bank FD?
Non-callable fixed deposit is a secure investment scheme in which the deposit amount is kept locked-in for a fixed period. Premature withdrawal is not allowed in this. Usually the initial investment amount is higher, but in return one gets attractive and higher interest rates.
Features and benefits of non-callable FD
The biggest advantage of non-callable FD is that the investor is guaranteed to get more interest along with the entire amount on maturity, which can be higher than callable FD. Premature withdrawal of these FDs is possible only in very limited circumstances – such as death or bankruptcy of the account holder. This keeps the investment safe. The investment remains locked for a fixed period, due to which the capital remains safe and grows at a steady rate.
Pay attention while choosing callable and non-callable FD
Non-callable FDs generally offer higher interest rates as the amount remains locked for a fixed period. At the same time, due to the facility of premature withdrawal in callable FD, the interest rate may be slightly lower. According to Axis Bank, if the investor is likely to need money in the future, callable FD may be a better option. On the other hand, non-callable FDs are considered more suitable for investors who aim to get safe and stable returns in the long term.
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