What is monthly interest payout fixed deposit all about?

Fixed deposits are investments that offer higher interest rates as opposed to a savings account. The account holder should park their hard-earned funds in the financial institute for a predetermined period. The term is typically between one to five years. The deposit gets held by a fixed rate that the account holder receives at regular intervals, i.e. monthly, quarterly, half-yearly, or yearly. Sometimes, they receive the same at maturity. If you have opted for a monthly payout, you will receive FD income monthly.

Since fixed deposits are a risk-averse financial investment option with assured high returns, it is a common investment choice. The interest rates are attractive and priced different by financial institutes depending on the tenure. The lower the limit of the deposit that one can park is INR 1,000 while the upper limit differs.

How to calculate monthly fixed deposit interest payout?

Today, all banks offer fixed deposits online that enables potential investors to calculate an estimate of the monthly interest payout. You could use the FD calculator in the following manner –

  • Visit the website of the concerned bank if you wish to open the FD account.
  • Click on the fixed deposit option from the enlisted services.
  • If the page does not include the fixed deposit calculator, click on the option that leads to the instrument.
  • Enter the deposit amount and the desired duration.
  • You can choose the interest payout interval as monthly.
  • The instrument then formulates the monthly interest payout corresponding to the bank’s interest rates.

FD as an investment option:

One of the investment options in India that are in demand are fixed deposits. The following features have increased its demand –

  • Unlike the share market, the returns on FDs remain unaffected by market fluctuations. This makes FDs the safest option.
  • The investor is aware of the estimated size of returns they would receive on maturity. Hence, they can plan their finances until the tenure.
  • Cumulative FDs are term deposit schemes which accumulate your total income to the returns upon maturity. Investors could also receive a large sum via a single investment. Investors who are likely to benefit from a large amount of funds should opt for the scheme.
  • Non-cumulative FDs, on the other hand, make sure interest payouts are done periodically. Individuals who require cash frequently apart from their regular income can opt for such a scheme.
  • The rollover feature in specific FD schemes enables the account holders to reinvest the returns for a new term deposit. This makes sure there is a continued growth of savings.
  • FDs worth INR 1 lakh are insured under the deposit insurance and Credit Guarantee Scheme of India.

Conversion from annual to monthly interest rate:

  • The annual rate should get converted from percentage to decimal format
  • Divide the annual rate by 12
  • Multiply the annual amount with the interest amount to obtain the monthly interest rate
  • Then turn the monthly rate into a percentage by multiplying it with 100

Remember, considering you have opted for monthly interest income, it makes no sense to make premature withdrawals. Also, they could attract penalties from the financial institute. Hence, be it monthly or annual returns, make sure to use the FD calculator and determine the interest rates.

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