When it comes to safe and reliable investment options, fixed deposit accounts often top the list. They’re known for being simple, low-risk, and offering guaranteed returns. But despite their popularity, there are still many common myths floating around that stop people from fully taking advantage of them. If you’ve ever wondered whether a fixed deposit is worth it or if you’ve heard things that made you hesitate, it’s time to clear the air.
Let’s break down some of the most common myths about fixed deposit accounts and set the record straight once and for all.
Myth 1: Fixed deposits don’t give good returns
This is probably one of the most common misconceptions. Many believe that fixed deposit interest is too low to make a real impact on your savings. But the truth is, FD rates vary across financial institutions and can often be quite competitive, especially when you explore options with a small finance bank.
Yes, FD rates may not be as high as the returns from high-risk investments like stocks or mutual funds. But the trade-off is stability. You know exactly what you’re getting at the end of your investment period, which makes it ideal for risk-averse investors or those with short- to medium-term goals.
Myth 2: You need a large amount to start a fixed deposit
Many people think that they need a hefty sum to open a fixed deposit. This simply isn’t true. Today, you can start a fixed deposit with a small initial investment, especially if you’re investing through a small finance bank. These banks often provide flexible deposit schemes tailored to a wide range of financial needs and income levels.
You don’t need to wait until you’ve saved a fortune. Even a modest deposit can grow over time when combined with good, fixed deposit interest and proper planning.
Myth 3: Fixed deposits are not tax-friendly
While the interest earned on fixed deposit accounts is taxable, there are tax-saving variants available. With some types of deposits, you can claim deductions under applicable tax rules. Additionally, smart planning—like splitting deposits across financial years or keeping them below certain thresholds—can help manage your tax liability.
Tax should not be the sole reason to avoid a fixed deposit. Instead, consider how it fits into your overall financial strategy. It can be an excellent complement to other investments.
Myth 4: Fixed deposits are rigid and lack flexibility
There’s a popular belief that once you lock in your money in a fixed deposit, it’s stuck until maturity. While breaking a fixed deposit early might come with a small penalty, you still have the option to do so if needed. This gives you some degree of flexibility.
Moreover, many institutions now offer features like auto-renewals, partial withdrawals, and even overdraft facilities against your fixed deposit. When you explore offerings from a small finance bank, you might find even more innovative features designed to work around your needs.
Myth 5: Fixed deposits are outdated in today’s digital world
Some think that fixed deposit accounts are old-school and not suited for modern banking. But the truth is, most banks now allow you to open and manage fixed deposit accounts online. You can check FD rates, invest, renew, and even withdraw—all from your mobile or laptop.
Digital banking has made fixed deposit investing just as easy and convenient as any other online financial service. Especially with small finance banks, the digital experience is being made simpler and more customer-friendly every day.
Myth 6: You can’t beat inflation with fixed deposits
Inflation is a concern when it comes to preserving the value of your savings. But it’s not fair to say that a fixed deposit won’t help at all. It depends on the prevailing FD rates and how you structure your deposits.
For example, laddering your fixed deposit investments—meaning spreading them across different tenures and FD rates—can help you take advantage of rising interest trends. You can also reinvest the maturity amount along with the interest to take full benefit of compounding over time.
Myth 7: All banks offer the same fixed deposit interest
Not true at all. Fixed deposit interest can differ significantly between banks and financial institutions. While larger banks may offer a certain rate, small finance banks often provide higher FD rates to attract customers. So, if you’re just looking at your main bank’s offer and assuming all rates are similar, you might be missing out on better returns.
It always pays to shop around and compare before you make your decision.
Myth 8: Fixed deposits are only for senior citizens
Senior citizens often receive additional benefits such as higher fixed deposit interest, but that doesn’t mean fixed deposit accounts are limited to them. People from all age groups, including young professionals and middle-aged individuals, can and should consider fixed deposit investments as part of their financial planning.
Whether you’re saving for a vacation, an emergency fund, or your child’s future, a fixed deposit can offer the security and guaranteed returns you need.
Conclusion
A fixed deposit account is one of the most reliable financial tools available today. It may not be flashy or high-risk, but it’s perfect for those who value security, predictability, and steady growth. Now that these myths have been debunked, you can approach fixed deposit investing with more confidence and clarity.
As always, it’s a good idea to explore options across banks, especially with a small finance bank, where you might find higher FD rates and more flexible features. Combine this knowledge with thoughtful planning, and you can make your savings work smarter for you.