Difference between FD and RD

FD and RD are the terms used in the context of banking; they both are saving instruments offered by the banks to the customers. Both FD and RD give interest on the savings, however, there are many differences between FD and RD. Let’s look at some of the differences between the two –

  1. Full form of FD is Fixed Deposit while a full form of RD is Recurring Deposit.
  2. In the case of the fixed deposit, the individual has to deposit a lump sum amount on which he or she gets interest at fixed rate whereas in case of recurring deposit an individual has to deposit a fixed amount every month and he or she gets interest at fixed rate on the amount deposited by him or her.
  3. In a case of FD, an individual gets fixed deposit receipt specifying the details like principal amount, maturity date, the rate of interest from the bank whereas in the case of RD an individual gets passbook from the bank.
  4. In case of fixed deposit there is no need for an individual to go to the bank until the maturity of the FD whereas in case of recurring deposit an individual has to go to the bank every month in order to deposit cash in the RD and also to update the passbook so for individuals who do not want to go to bank every month fixed deposit is preferable than RD. However due to the advent of the internet and mobile banking now one can transfer funds from saving account to recurring deposit account from home also hence nowadays there is no need to go the bank for RD holders also provided that they have enough balance in the saving account.
  5. In the case of FD, there is no need for any standing instructions to be given to the bank while in the case of RD if one wants to transfer funds from saving account to RD account he or she has to give standing instruction to the bank to transfer the funds on a particular date of every month.
  6. In the case of FD, an individual gets interest on the entire amount whereas in the case of RD an individual gets interest on the amount deposited by him or her. So for example, if a person makes $60000 FD then he or she will get interest on entire $60000 whereas if a person starts RD of $5000 per month for 1 year then he or she will get interest on $5000 for 12 months then interest on $10000 for 11 months and so on.
  7. FD is suitable for those people who have plenty funds lying idle in saving account whereas RD is suitable for those people who want to save in small amounts because their income is less and they do not have enough funds in their saving account.

As one can see from the above that both RD and FD have many differences and an individual thinking about opening either RD or FD account should carefully look at above differences and then decide the best alternative for him or her.

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