Investments are one the greatest and most rewarding tools for creating wealth nowadays. For this purpose, it is necessary to have an investing platform that is secure and easy to handle. Savings account and fixed deposit account are two such platforms that allow investors to earn fixed returns easily despite the instability of market situations.
Savings Account vs Fixed Deposit Account
The main difference between savings account and fixed deposit account is that with a savings account, people are allowed to deposit any amount of money at any time as per their wish. Meanwhile, a fixed deposit account requires a fixed amount of money to be deposited for a certain period of time.
A savings account is a platform that allows a person to save money that he/she doesn’t need or plan to spend at the current moment. The money may be deposited as per the wish of the account holder. Most of the time, such an account is opened in order to stash many for a specific purpose or goal.
A fixed deposit account is a platform for people to earn higher interest on deposited money than they do through a savings account. However, the account holder is required to deposit a fixed amount of money either monthly or annually until the given maturity date. Such accounts are provided by banks or NBFCs.
Comparison Table Between Savings Account and Fixed Deposit Account
| Parameters of Comparison | Savings Account | Fixed Deposit Account |
| Meaning | A savings account is a bank account in which the account holder can deposit any amount of money at any time. | A fixed deposit account is a bank account in which an account holder must deposit a fixed amount of money during a fixed tenure. |
| Objective | Users open a savings account to save up money for a specific purpose or goal. | Users open a fixed deposit account to earn interest on funds that are idle. |
| Rate of Interest | The rate of interest for such an account generally ranges between 4 to 6 per cent. | The rate of interest for such accounts is higher than that of savings accounts. |
| Duration | A savings account is continuous in nature. | A fixed deposit account is a one-time investment for a fixed period of time. |
| Withdrawal | An account holder can withdraw money at any time. | An account holder is not allowed to withdraw money until the end of the tenure. |
| Minimum Balance | A savings account generally has a low minimum balance. | A fixed deposit account has a higher threshold for minimum balance. |
| Loan | The account holder is not provided with any loan facility. | The account holder can get a loan of up to 75 per cent of the amount that has been deposited. |
What is Savings Account?
A savings account is a bank account in which the holder can deposit money at any time. The amount deposited can be as per the wish of the holder. However, such an account cannot be used to make purchases or be used with a debit card. Nonetheless, an account holder can withdraw money at any point in time.
Savings accounts are generally opened by people who have a specific purpose or goal for which they are stashing money. Most people always deposit a certain amount of their income so that future expenses can be taken care of without much burden. A perf of opening such an account is that the deposited money earns a certain percentage of interest. The rate of interest depends on the bank in which the account has been opened.
Savings accounts are mostly free to open, especially those that are made with banks, community banks or credit unions. However, a limitation of such an account is that the holder is not allowed to avail a loan against the deposited money. It is still safer to open a savings account that stash physical cash. The money deposited is easy to access at any ATM or with the bank’s teller.
What is Fixed Deposit Account?
A fixed deposit account is an account in which the holder is required to deposit a fixed amount of money for a fixed period of time. Such an account is generally opened by large organizations or wealthy people who seek to earn interest on funds that are idle. The more the amount of money, the higher is the interest earned. Moreover, such accounts have a higher rate of interest than a savings account does.
Once the money is deposited, it cannot be withdrawn or used for making purchases. The account holder can only withdraw it once the tenure of the fixed deposit has ended. However, a perk of opening such an account is that the holder can avail a loan of up to 75 per cent of the amount that has been deposited by them.
Opening such an account may or may not require the creation of a separate account. However, may a time a savings account can also be converted into a fixed deposit account. Another advantage of opening this account is that the holder can save a certain amount of tax with it. However, this can only be done when a certain kind of fixed deposit account namely Tax saving fixed deposit is opened.
Main Differences Between Savings Account and Fixed Deposit Account
Conclusion
Savings account and fixed deposit account are two kinds of accounts that are great options for earning interest. However, a savings account is generally opened for a specific purpose. On the other hand, a fixed deposit account is simply opened so that the holder can earn interest on idle money.
There are many differences between the two, a major one being that a savings account is more flexible than the latter. While a holder is allowed to deposit and withdraw money at any given point from the account, fixed deposit accounts do not allow the account holders to do so.
References
ncG1vNJzZmiZo6Cur8XDop2fnaKau6SxjZympmeUnrOnsdGepZydXZeytcPEnqVmq5Grtq%2Bz0maYnJufqru1ecCnm2aema2ypXnDnqeoq5mpeqKvwqisp6xdrLa1tIytmJuklWQ%3D