Making the most of your fixed deposit
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This post is a part of our ongoing series on Fixed Deposits.
We spoke earlier about whether it is worth opening a fixed deposit in these days of low returns, and also about which fixed deposit should one open and how to go about selecting them. If you’re reading this post, it means you’re either looking to open a fixed deposit with your bank or you already have a deposit which you’d like to unlock value for. Congratulations! Most deposit holders just take a deposit and forget about them. There is so much more you can do with your deposit! Here are a few options –
Use it to enhance your banking relationship – Banks have various tiers of accounts. If you have a salary account, you probably have a decent variant which has several features. The way banks give out these perks is based off the total relationship value. That would also include a fixed deposit. By putting in an FD, you can do two things – forget about minimum balance since the deposit would count towards that, and also ask for a better account variant. A higher variant would give you better privileges like a dedicated relationship manager or investment advice, any ATM withdrawal, higher daily limits etc. All of these would come to you for free since you anyway decided to have a fixed deposit as an investment option. Another wise thing to do would be to convert your relationship with the bank to a family account. Get additional accounts opened for everyone in the family and everyone would be eligible for the same perks and features – all at zero balance since the fixed deposit would take care of the total relationship value for the whole family 💡 Often, a better bank account variant would get you better loan rates. So your home loan or car loan could become a bit cheaper if you’re a privilege account holder, which could happen through your fixed deposit.
Get a credit card – The easiest way to get a credit card is to get it against a fixed deposit. Many people don’t even know about this option. You don’t need to submit any documentation and about 75% of your deposit would be allotted as a limit. If you don’t have a credit card – either because you’ve never thought of it or because of poor credit, this option works for you. For people with poor credit, this is actually a wonderful way to repair your credit rating. Just get a small card – a deposit of ₹20000 will get you a card of ₹15000 which you can use to spend and repay properly and your track will improve over time. Another option is if you already have a credit card and you need a better variant but your income isn’t sufficient for it. Add a fixed deposit and the bank will get you your upgrade pretty instantly. For as long as you use the card, your deposit will be locked-in. That’s a good thing too – since otherwise we would be tempted to break the deposit and use it up!
Get a loan against your FD – When we take a deposit, we tend to see the duration that offers us the best interest rate and go for it. In these low-interest times, if we exit the deposit, we will have to get in later at 4.5% or some such ridiculous annual rate as interest rates are bound to fall a bit more in the coming year before stabilising there. So if you’re in need of a bit of capital for a temporary expense, just take a loan against your deposit. The interest rate charged is usually 2% more annually than what the bank is giving you for the FD, and the best part is this is charged on a daily basis. So if you pay it back in a few weeks, you only pay that extra annual 2% for those couple of weeks; which comes to a very small amount. Your deposit is untouched, the interest rate continues, and your expense has been met. This is good for businesses also as an overdraft.
Use deposit as a guarantee for a chit fund – If you have a chit fund with any of the leading providers, and if you’ve won the month’s auction bid, you can use your deposit receipt as a guarantee to access your chit fund payout. FD receipts from most leading banks are accepted by these companies. The deposit will be under lein to them till the chit fund is cleared off and then your deposit is accessible by you again. The best part is that your deposit continues earning interest throughout the period, and you haven’t needed to run behind government employees to guarantee your chit fund withdrawal. Best of both worlds! 🤩
Based on the bank you have your deposit with, there may be some more things you can do. Don’t let the deposit just lie there. Use it, unlock value, all while the deposit continues to earn you an interest 💪🏼
If you have a specific query, feel free to reach out to us via any of our Social Media accounts – Twitter, Facebook, Quora.
