Term Deposit Vs Fixed Deposit

When choosing between term deposit vs FD, investors can often get into a dilemma. On the surface, both seem to be similar as they are deposits offered by banks and financial institutions with fixed interest rates. However, there are differences that investors should know about.

By prioritising your financial goals, you can understand whether to invest in a term deposit or a fixed deposit (FD). Explore their meanings and differences below.

Term Deposit Vs FD - Meaning

Term deposits are investments with a fixed maturity period offered by banks and financial institutions. Usually, term deposits have a short maturity period that ranges from 21 days to 5 years. It helps you earn guaranteed returns; however, you might have a minimum deposit amount requirement.

Fixed deposits are investments where depositors invest a lump sum of money for a specific tenure and earn interest at a fixed rate based on the tenure of booking. Depositors can receive interest periodically based on the option they choose while booking the FD. They can further consider premature withdrawal; however, in such a case, a penalty of 1% applies to the effective interest rate.

Fixed deposits are usually available for a longer period of up to 10 years. Moreover, tax-saving fixed deposits might have a lock-in period of 5 years wherein banks do not allow premature withdrawal.

Features of Term Deposit Vs FD

Here are the features of term deposits and fixed deposits:

Term Deposits

The interest rate for term deposits may be fixed or variable.
These are secure investment options backed by government bodies.
Investors can choose a range of tenures based on convenience.
Term deposits, like recurring deposits, offer low minimum deposit amount requirements.

Fixed Deposits

Fixed interest rates of fixed deposits make it a safe investment.
You can choose an FD tenure between 7 days to 10 years based on your financial goals.
Compounding interest helps investors ensure stable wealth accumulation.
You can liquidate FD before maturity if required.
Banks allow loans against FD to help investors avoid premature withdrawals.

Term Deposit Vs FD Benefits

The following are the benefits of term deposit and fixed deposit:

Benefits of Term Deposit

Here are the advantages of term deposits:

Term deposits allow investors to earn a relatively higher interest rate compared to bank savings account interest rates.
The low-risk association makes term deposits a secure investment option for conservative investors.
Term deposits, such as recurring deposits, allow investors to deposit small amounts of money regularly to grow their corpus with stability.

Benefits of Fixed Deposit

Here are the advantages of fixed deposits:

Fixed deposits offer multiple interest payout options for investors. You can choose a monthly, quarterly, annual or cumulative interest payout option. This helps you meet your financial needs and expenses based on your convenience.
Banks provide options to investors to auto-renew fixed deposits on maturity or receive a credit of the maturity amount (principal plus interest). This ensures flexibility for investors to reinvest their corpus.
As an investor, you can book an FD online or offline. Thus, it helps investors choose a convenient mode of transaction when opening an FD account.

Difference Between Term Deposit and Fixed Deposit

Here are the differences to elaborate on term deposit vs FD:

Parameters	Term Deposit	Fixed Deposit
Interest Rates	The interest rate can be fixed or variable based on the market conditions.	The interest rate remains fixed for the entire tenure.
Deposit Tenure	The tenure can range between 3 weeks to 5 years.	The tenure ranges between 7 days to 10 years.
Flexibility	Term deposits are more flexible compared to fixed deposits.	Fixed deposits are less flexible compared to term deposits.
Renewability	You cannot renew a term deposit	You can renew a fixed deposit.
Penalty on Premature Liquidation	Penalty applies on premature withdrawal.	A penalty of 1% on the effective interest rate for that period applies to premature liquidation of fixed deposits.
Suitable Investors	Term deposits are more suitable for short-term investors.	Investors with mid-term or long-term financial goals need to invest in fixed deposits.

Book a fixed deposit with our Stable Money App and choose the auto-renewal option to fulfil your financial goals!

Comparison of Interest Rates Across Prominent Banks

Here are the interest rates for fixed deposits (principal below ₹3 crore) across prominent banks in India:

Banks	Interest Rate for 1 Year (Non-senior Citizens)	Interest Rate for 5 Years (Non-senior Citizens)	Interest Rate for 10 Years (Non-senior Citizens)	Interest Rate for 1 Year (Senior Citizens)	Interest Rate for 5 Years (Senior Citizens)	Interest Rate for 10 Years (Senior Citizens)
HDFC Bank	6.60%	7.00%	7.00%	7.10%	7.50%	7.50%
ICICI Bank	6.70%	7.00%	6.90%	7.20%	7.50%	7.40%
Axis Bank	6.70%	7.00%	7.00%	7.20%	7.75%	7.75%
State Bank of India	6.80%	6.50%	6.50%	7.30%	7.50%	7.50%
Punjab National Bank	6.80%	6.50%	6.50%	7.30% (senior citizens) and 7.60% (super-senior citizens)	7.00% (senior citizens) and 7.30% (super-senior citizens)	7.30% (senior and super senior citizens)

When you have to choose between term deposit vs FD, determine whether you have a short-term or long-term financial goal. If you have a short-term goal, you may prefer term deposits. On the flip side, if you have a long-term financial goal, you may want to invest in fixed deposits.