What’s The Difference Between RD and FD?

People these days are more inclined to FDs and RDs. As it is known to people that FD is an abbreviation of fixed deposit and RD happens to be of recurring deposit. People aim in earning more interests at a short interval of time. That is what introduces the concept of FDs to the general people. FD is actually a financial instrument that is being provided by the financial institutions. The rate of interest earned in FDs is way more than the other form of savings. This kind of investment happens to be very safe and yield a guaranteed amount of money to the people after a stipulated time mentioned in the bond. However, one needs to park the whole amount of money at the time of opening such an account.

What's The Difference Between RD and FD?

Introduction to RDs

RDs are actually a special kind of term deposits that are being offered by the financial institutions. This is highly beneficial for those who have a fixed and steady source of income and is capable of depositing a part of their income as RD installments. In here, a stipulated time span has to be chosen by the depositor. Also, there is a minimum balance or amount which in here is known as regular installments of RD. One cannot deposit an amount which is lower than the minimum admissible amount for rds.  In case of a RD, there are few points that are to be remembered prior to such kind of a deposit. The most noteworthy thing in a RD is that, if one fails to pay the installment amount for any particular month or for a series of months then will result in a lower maturity value.

RD Calculation

A RD is highly valued by the people who have got a steady income. In here, the easy installments are not a headache for the people. This is because the installments are being deducted by the financial institutions automatically on a particular date of every month. The interest is being divided by twelve and is directly applied to the principal of a particular month. The interest is then added to every month’s amount and this, in turn, tends to be the next month’s principal. This calculation recurs for the remaining time period until the RD matures. The returns from the RD can be calculated using online RD calculator.

FD Calculation

Fixed deposits are being preferred by people these days a lot. The FDs nowadays are being calculated using an FD calculator. In here, principal, rate, time, and amount, are of paramount concern for the purpose of calculation. The rate of interest is directly applied to the principal. The interest is being calculated at the end of the year. This interest, in turn, gets added to the principal. This amount tends to become the new principal for the next year. In this way, the interests are being compounded annually at the end of each financial year.

Respective Goals of FD and RD

FDs are mainly for those who are capable of funding the whole amount to their respective bankers. There they earn a good amount i.e. rather a handsome maturity amount after a certain span of time. However, the FDs mainly happen to be a good financial instrument which could yield a better result if the money is being parked for a long time.  However, a RD is for those who would want to go for easy installment procedures. Here the interest rate is also quite good. However, one should remember that this kind of deposit might be more helpful when one wants to earn better interests in really short time.