What is a post office fixed deposit?
Post office fixed deposit is a type of certificate account offered by the Indian Post Office, which helps you save money with interest. You need to open it in a post office and maintain a minimum balance there so that you can keep earning interest on your investment, which you can withdraw at any time after an initial maturity period.
A post office fixed deposit is a type of term deposit that allows you to make a fixed deposit over a specific period, usually 6 months or above. These deposits are made at post offices and other government-owned banks in India. While many people don’t understand the pros and cons of a post office fixed deposit understanding is as easy as a GST calculator. So here we will clarify everything for you.
Post office fixed deposits are popular amongst individuals who want to save money but do not have enough liquidity to buy a term deposit.
Post offices offer several types of accounts, including current accounts, savings accounts and one-year fixed deposits. These are known as bank-type products because they are issued by state-owned banks.
Advantages of fixed deposits
1. Low Minimum Amount
The minimum amount required to open a PPF account is Rs 500, that too only if the account has been opened recently. The minimum amount to open a fixed deposit account is Rs 1,000. The minimum amount in an FD is Rs 1,000 and for a post office FD, it is Rs 50,000.
2. High-Interest Rates
The interest rates are high if you compare them with other banks or financial institutions. The monthly interest rate on PPF bank deposits is 8% with 1 year maturity period and 10% with 3 years maturity period. On the other hand, FDs offer 5-6% interest per annum on savings accounts and 6-9% interest per annum on current accounts which are usually linked to your credit card or debit card.
3. Premature Withdrawal
Post Office fixed deposits are available only in accounts with more than Rs 1 lakh deposited in them. The main advantage of this product is that you can withdraw your money without any penalty if you wish to do so before the maturity date of your account or even before the stipulated period mentioned in the certificate issued by the bank. For making accurate calculations related to various aspects of premature withdrawal you can use calculators like ppf calculator, post office maturity calculator etc.
Disadvantages of post office fixed deposit
There are disadvantages of a post office fixed deposit. The following are some of them:
1. You have to pay a fee for taking the money out of the account before the maturity date. There is no way you can avoid this fee.
2. There is no interest on your money until it matures, which means that if you want to earn interest on your savings account, you need to invest in risky stocks and other securities that can get your money quickly or generate high returns over time.
3. The rate of interest offered by a post office fixed deposit is fixed and cannot be increased even when inflation rises.
4. If you want to withdraw your money before maturity, then you will have to pay an early withdrawal penalty which may be up to 25%.
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