Investing in fixed deposits (FDs) is considered a safe investment and offers several benefits. However, many people choose to withdraw their FDs before they mature.
A common question arises: Will they receive interest if they do this? Many individuals trust fixed deposits due to their guaranteed returns. Experts often recommend these investments for their stability.
While many investors opt for bank FDs with a tenure of five years, unforeseen circumstances may lead them to withdraw their money after just one year. If you find yourself in this situation, will you still earn interest?
One key feature of fixed deposits is the option for premature withdrawal. If necessary, this allows you to access your funds before completing the FD term. However, a prevalent concern is whether you will receive interest on the amount deposited when doing so.
When people who invest in a 5-year FD withdraw funds early, they face significant consequences. First, they will typically receive a lower interest rate and a penalty fee of 0.5% to 1.0%.
Additionally, it’s important to note that banks will offer interest based on the card rate rather than the original booked rate. The booked rate refers to the interest rate agreed upon at the time of deposit.
If you break a 5-year FD after just one year, you will receive interest based on the card rate applicable at that time rather than the higher booked rate. Due to the penalty and reduced interest, keeping fixed deposits until they mature is generally advisable.