Savings account interest rates have been slashed to 4% per annum by most of the major banks lately. Banks and financial institutions that are still offering 5-6% savings interest rate can be counted on fingertips. Thereby, it’s important for an individual to know some other options where he/she can save their money and yield a better interest rate.
While mutual funds and few other investment options yield good returns, there’s always market risk involved. Therefore, individuals who prefer their peace of mind over risk can explore the below options for saving their money to earn more interest than what most of the banks are currently offering on savings accounts.
1. Fixed Deposits
Fixed deposits earn an interest rate of 6-7% and the lock in period is generally 5 years but it can vary from 7 days to 10 years. Individuals can choose either the traditional FD plans wherein the amount is locked in for a fixed term and then you get the lump sum or go for a Re-Investment Fixed Deposit plans wherein interest is compounded quarterly and reinvested with the principal amount.
2. Term Deposits
Term Deposits carry an interest rate 5.5% and above with a lock in period of 45 days to 10 years. Leading banks give options like auto-sweep from savings account above a certain threshold which goes to the Term Deposits in multiples of thousands. These Term Deposits enable guaranteed returns, choice of interest payout and liquidity too by giving overdraft facility of up to 90% of the Deposit’s value.
3. Recurring Deposits
Recurring Deposits can yield interest rate of 7-8% per annum. The minimum lock in period for Recurring Deposits varies from 12 months to 120 months. The amount fixed for monthly recurring deposit payment could be as low as ₹100 per month. RDs also enable liquidity via OD and loan facility of up to 90% value of the RD.
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