Certificate of Deposit vs Fixed Deposit

Today, finding a balance between returns and security can become a difficult task with a variety of investment options available. However, options of fixed deposits (FDs) and certificates of deposits (CDs) stand tall among the myriad options. Both these deposits promise investors assured returns, along with growth and stability in their savings.

Let us take a look at this article to clearly understand different aspects of certificate of deposit vs fixed deposit, along with analysing which is the best option for you.

What is a Certificate of Deposit?

A Certificate of Deposits, also known as CD, is a financial instrument giving you a fixed income and is governed by the Reserve Bank of India (RBI). CDs are generally issued in dematerialised form, and the issuer assures payout on the deposit from the beginning. Any Indian financial institution or scheduled commercial bank can issue CDs to customers.

These certificates are mainly issued at a specific discount amount on their face value. The purpose of issuing a certificate of deposit is to denote in writing that you have deposited money in the bank for a fixed tenure. Also, the bank will pay a fixed rate of interest on this deposit based on the principal amount and tenure of the same.

There are a few benefits of selecting certificates of deposits as your investment tool. Some of them are as follows:

  • It is a secure investment option with an assured return after maturity and no risk involved due to market volatility.
  • You can enjoy flexible choices to choose your interest payout option. Monthly, yearly or lump sum payout of interest is available.
  • Interest rates on CDs are higher than traditional saving schemes.
  • No additional cost is required to open or maintain your CDs. You only have to pay the amount that you want to invest in the bank – no extra charges.

What is a Fixed Deposit?

Fixed deposits, or FDs, are a safe investment option in which you deposit a specific amount of cash for a set period of time at an attractive interest rate. This is a secure investment choice that both banks and NBFCs offer. 

Interest rates applicable on your FDs are higher than the interest rates of savings accounts. When you book an FD for a certain tenure, the applicable interest rate does not change, even if market fluctuations occur. This gives a sense of assurance to investors regarding their interest returns on FD.

Let us check some benefits of investing your money in a fixed deposit account.

  • Investing in FDs always encourages you to save your money in an organised manner. You can opt for short-term or long-term savings with a fixed deposit plan as per your future financial goals.
  • With fixed deposits, your returns are assured as the interest rate doesn’t change with market changes. You will get the same interest till the end of your maturity date.
  • Senior citizens benefit from FDs in terms of additional rates applied on interest. The additional rate can range between 0.25% to 0.50% per the financial institution’s policy.
  • You can get a loan against your fixed deposit, and premature withdrawal is also available. But both are available against a preliminary charge or fees.

Certificate of Deposit vs Fixed Deposit

Understanding CD vs FD is important as it gives you a clear picture of the investment instruments and how they work. Check the below table to analyse the difference between a fixed deposit and a certificate of deposit.

CategoryFixed Deposits (FD)Certificate of Deposits (CD)
Investment TenureWith FDs, you get a flexible tenure of 7 days to 10 years, as per your financial suitability and requirements.With CDs, you get a tenure of 7 days to 1 year from commercial banks and other financial institutions, it is 7 days to 3 years.
Return on InvestmentInterest rates vary as per the types of customers and tenure of FD. No change in interest rate will occur due to market changes, thus assuring returns till the maturity period.Interest rates are higher than FD rates. This is because the investment plan has a risk of changes in interest rates during the tenure.
Benefits for Senior CitizensThey get an additional interest rate of 0.25% to 0.50% on the applicable rates.No special benefit is applicable for senior citizens.
Risk InvolvedDoes not involve any risk as DICGC insures the principal and interest amount of investors for up to ₹5 lakhs.Involves risks as these investments are not insured under DICGC and market fluctuations can affect repayment amount.
Discount on Face ValueNot applicable to FDs.Allowed for CDs.
Tax BenefitsTax saving fixed deposit schemes ensure tax exemptions during income tax returns.No tax exemptions apply to this investment.
Minimum Investment AmountThe minimum investment amount for FDs is ₹1,000 in general cases. However, for some financial institutions, the minimum amount is ₹100.₹1,00,000 is the minimum amount of investment for a certificate of deposits.
LoanYou can take a loan against your FD as per your bank’s policy. Well-known banks offer 90% of the FD amount as a loan.Taking loans against CDs is not allowed.

CD vs FD – Which One is Better?

The debate on CD vs FD mainly depends on your financial goals and how you want to manage your money to save and grow it over time. 

Investing in CDs will be useful if you want to deposit your money for a short period but gain high returns. Nonetheless, it will also come with risks of interest rate fluctuation and market volatility, affecting the repayment amount at times. But, returns on this investment are assured by banks. Hence, to fulfil short-term financial goals, a certificate of deposit is the best investment tool.

On the other hand, FDs are your friend if you are looking for a risk-free investment option for a long tenure. Save and grow your money for long tenures on the fixed interest rate applicable to the deposit amount. You get to choose the interest payout interval, thus securing a regular income from your savings.


When you look at the points of certificate of deposit vs fixed deposit, you get to understand which deposit scheme is suitable for you as per your present financial situation and future goals. Nonetheless, before investing in any of the deposit plans, make sure you read all the terms and conditions and offers applicable to them to grow your money effectively and avoid risks as much as possible.

Regardless of your choice, CD and FD offer a safe haven for your money, helping you grow your wealth over a certain period.


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