Get More From Your Bank: Maximize Fixed Deposit Interest

When choosing a bank for a fixed deposit, shopping around can make all the difference.

When choosing a bank for a fixed deposit, shopping around can make all the difference. Finding the bank with the highest FD interest rate can fetch hundreds or even thousands of extra money over time. 

While selecting a bank to make a fixed deposit, the rate of interest is often the most important factor and therefore you should opt for a bank that offers the highest FD rates. While selecting a bank, do evaluate the risks involved – for instance, cooperative banks are riskier than PSU banks and private banks.

As your money with each bank (all branches taken together) is insured only up to Rs 5 lakh in case the bank fails, it is not advisable to put all your money in one bank or check the CRISIL rating of the bank. You can make fixed deposits in the name of other family members as insurance cover is available to each person. You could consider making a FD in the name of older family members since some banks offer a higher rate of interest to senior citizens.

In addition to the stated maximum rate of interest on your fixed deposit, you need to evaluate the frequency with which the interest is credited on your fixed deposit. More frequent credit of interest will result in a higher effective rate of interest on your already high interest fixed deposit.

As a prudent financial planning practice, you should map your investments with a specific financial goal. All banks may not offer you a fixed deposit for your preferred tenure, so search for a bank that can meet this criterion and also offers the highest rate of interest on the fixed deposit for your chosen tenure.

The minimum amount with which you can make a bank fixed deposit differs across banks. Select a bank that allows an amount that is in tune with your budget. Since banks generally charge a penalty for premature withdrawal, try not to deposit a large amount as you may need part of the money before your FD matures.

You also should consider the loan amount available against your bank fixed deposit as well as the interest charged by the bank on a loan against the fixed deposit so that you can meet any emergency situation without having to break your FD.