Premature Fixed Deposit Withdrawals are a BIG NO-NO. Here’s Why?

Fixed Deposit is one of the best investment scheme which guarantees assured returns upon maturity. Thus, it is likely for people like you and me who’re investing for the first time to get lured towards it. Though FD is one of the best saving options, it has to be planned well in order to ensure optimal benefits. For instance, below are some rules one must follow before investing in Fixed Deposit or any other investment scheme:-

  • Plan your investment in advance and make sure you don’t have to withdraw it before maturity. Premature withdrawal of FDs or any other investment scheme is a big NO NO. Once an investment is subjected to premature withdrawal, it fails to yield the promised returns leading to disappointment for the investor.   
  • Invest in multiple smaller accounts. Investing your entire budget in only one account is unwise. If you ever have to liquidate your investment, you’ll have to lose the possible returns on the entire amount. That said, if you invest in multiple smaller accounts, you can withdraw one and let the others mature as pre-decided. This way you don’t lose much of your prospect interest income and get enough to manage your unplanned cash needs.

Bottom line: Even though premature withdrawal attracts penalty, one doesn’t lose their principal investment. The penalty, if applicable, is levied on the interest component rather than principal amount. Hence, if there’s a dire need for money which certainly can’t be avoided, there’s no harm in liquidating it.  

Read more about why say ‘no’ to premature Fixed Deposit withdrawals here.

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