When you think about investing your money, the safest and most secure option is to invest money in a fixed deposit. Most banks and NBFCs offer you the option to choose the interest payout option, which ranges from monthly, half-yearly, quarterly and yearly payments. You can choose the payout tenure as per your financial goals. Let’s get a detailed analysis of the monthly payout FD interest system, its benefits, and its calculation method.
How Can We Get Monthly Interest on Fixed Deposit?
When it comes to FD investments, you can pick the mode of interest payment on the deposit. There are generally two different types of modes available.
- Non-cumulative option: The interest is paid to the depositors every month, quarterly or directly after maturity.
- Cumulative option: The interest payout on the FD is compounded quarterly, and payment is made on maturity.
Fixed deposit with monthly interest payout option is highly popular among investors. This is because the depositors seeking a regular income via FD interest can use the money to fulfil their personal needs. This option is popular among senior citizens or retirees who hope to receive a steady pension as the FD interest.
Moreover, the tenure for fixed deposit accounts with monthly interest payout options ranges from 1 month to 5 years. This option offers the investors a steady flow of income on their investment as well as liquidity advantages.
Benefits of Fixed Deposits Monthly Interest Products
Before applying for a monthly interest payout fixed deposit scheme, check out the list of benefits discussed below.
1. Highly Liquid
Monthly payout FDs ensure your liquidity needs are met whenever you require them. You get access to a steady source of income and enjoy stable returns throughout your investment tenure.
2. Steady Flow of Cash
Monthly interest payout fixed deposits are safe from any market fluctuations and changes in interest rates. Hence, you can stay stress-free regarding disruptions in your cash flow and get a steady monthly income.
3. Availability of Long Tenures
Certain banks provide a long tenure of fixed deposits with monthly interest payments. If you are a retiree or require cash at monthly intervals, investing in this scheme can help you get a fixed sum every month for the entire tenure you choose to invest your money in.
4. Premature Withdrawals
Easy premature withdrawals FD facility is available for your monthly interest payout against a small amount of penalty. Hence, such a plan comes in handy when you require funds to manage any financial crisis.
5. Nomination Facility
You can enlist your nominee while booking your FDs with any financial institution. This will help your nominee get that FD’s monthly interest in your absence. Therefore, a fixed deposit monthly interest plan is a crucial technique to secure your dependent’s future with a fixed sum of money on monthly intervals.
How to Calculate the Interest on FD Monthly Interest Payout?
Calculating the monthly interest amount can be complex since the manual calculation method is quite complicated. However, if you use an online calculator, calculating your monthly interest amount for your fixed deposit becomes easy.
Here is a step-by-step guide on how you can use an online FD calculator to get the monthly payout amount.
- Step 1: Visit the FD calculator page of an online calculator.
- Step 2: Enter the amount you want to deposit in your FD. You can drag the slider to set it in the amount of your choice.
- Step 3: Select the tenure of your deposit followed by the interest rate applicable on that FD on the day of deposit. Again, you can use the slider to set the values.
After you enter all the details, you will get an option to set the payout option of your FD. Choose the ‘Monthly Payout’ option under the ‘Payout Frequency’ tab. You will get an instant result of the interest amount you will get on your FD investment at monthly intervals.
How to Convert the Annual Interest Rate to Monthly Interest Rate?
If you are unable to retrieve the fixed deposit monthly interest amount, you can easily convert the annual amount of interest to monthly rates. Here are the steps to convert the amount seamlessly.
- Step 1: First, convert the interest percentage to a decimal value by dividing the rate of interest by 100.
- Step 2: Divide the annual rate of interest you got in decimal by 12 to get the monthly rate of interest on your FD.
- Step 3: Multiply the value derived from the previous step with 100 to convert the monthly interest rate in percentage.
Let us look at an example to understand the process and calculation of converting an annual interest rate to a monthly rate.
Suppose you are a retired individual and decided to deposit a sum of ₹10 lakhs in FD with a bank. You have opted for a monthly interest payment option to secure a monthly flow of cash for your expenses and needs.
Now, let’s assume the interest rate applicable is 8% p.a. Therefore, to get the value of your monthly interest rate, you need to apply the calculation shown below.
- 8/100 = 0.08
- 0.08/12 months = 0.0067
- 0.0067 * 100 = 0.67%
Hence, the interest rate applicable on your monthly payout FD is 0.67%.
And, your monthly interest earning is = ₹10,00,000 * 0.67% = ₹6,700.
Nevertheless, you can avoid this complicated calculator by simply using an online FD interest calculator and knowing the sum you will receive at the end of every month.
Some of the Best Interest Rates offered by Banks
Even though every bank offers different fixed deposit schemes, you must compare the interest rate you can get in return for your investment. Here is a list of banks offering the best and most attractive interest rates on fixed deposits.
|Bank Name||Interest Rate (General Citizens) p.a.||Interest Rate (Senior Citizens) p.a.|
|State Bank of India||3.00% – 7.10%||3.50% – 7.60%|
|Axis Bank||3.50% – 7.30%||3.50% – 8.05%|
|HDFC Bank||3.00% – 7.30%||3.50% – 7.75%|
|ICICI Bank||3.00% – 7.25%||3.50% – 7.60%|
|Bank of Baroda||3.00% – 7.55%||3.50% – 7.75%|
|Punjab National Bank||3.50% – 7.25%||4.00% – 8.05%|
|IDFC First Bank||3.50% – 7.50%||4.00% – 8.00%|
|Union Bank of India||3.00% – 7.00%||3.50% – 7.50%|
|Kotak Mahindra Bank||2.75% – 7.25%||3.25% – 7.70%|
|HSBC Bank||2.85% – 7.50%||3.35% – 8.00%|
When you invest in a fixed deposit, you secure your future with a fixed amount and the interest earned. However, with monthly payout FD, you secure a monthly income in terms of your interest from the deposit. Therefore, before investing in any fixed deposit scheme, make sure you go through different terms and conditions related to the monthly interest payout system and compare the interest rate as per your suitability.