A Recurring Deposit (RD) scheme lets you save a set sum each month into an RD account over a specific period. There are two main types of RD accounts. The traditional RD account requires you to make a fixed monthly deposit on a designated date. As opposed to this, a Flexi RD account offers more freedom by allowing you to choose both the deposit date and the amount. This flexibility is the key distinction between standard RD and Flexi RD accounts.
Today, in this blog, we will talk about what a Flexi Recurring Deposit account is and its benefits.
What is a Flexi Recurring Deposit?
A Flexi Recurring Deposit (RD) provides both convenience and flexibility for depositors, allowing lump sum investments whenever funds are available. It consists of 2 parts: the core amount, which is the initial deposit made when the RD is opened, and the flexible amount, which can vary with each monthly instalment based on available funds.
Opening a Flexi Recurring Deposit requires an initial core amount for a specified tenure, which varies depending on the bank. The flexible portion can be increased in set multiples up to a maximum limit. The interest rate on the core amount is determined by the tenure of the recurring deposit, while the flexible amount earns interest from the date of each deposit. The core amount must be deposited on a predetermined date to avoid penalties from the bank.
In contrast, the flexible amount can be deposited at any time during the month without incurring penalties. Flexi Recurring Deposit schemes can be closed prematurely at any time without any additional charges.
How Does a Flexi RD Work?
Flexi recurring deposits offer depositors the convenience of choosing any deposit amount that suits them and making their payments at any time during the month. Typically, the minimum deposit amount is ₹100, but depositors can increase this amount according to their preferences.
Flexible Recurring Deposit: Benefits & Features
The Flexi RD is an amazing scheme that comes with plenty of features and benefits that work in your favour. Below are some of these widely recognised benefits:
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Flexible Deposit
After you deposit the initial core amount, you can add more funds whenever they are available. The bank limits how much and how often you can deposit additional amounts. Furthermore, you can make multiple deposits within a month, following the bank's terms and conditions.
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Choose Investment Tenure
You can choose the investment period based on your financial goals and needs. If you're setting aside part of your earnings to buy a new car next year, you might opt for a 12-month tenure. However, the minimum and maximum tenures can differ depending on the bank. While certain banks permit a 12-month tenure, others require a minimum tenure of five years (60 months).
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Variable Interest Rate
The interest rate on your investment in a Flexi RD account depends on the amount and the tenure. Moreover, the rate of interest on additional instalments also varies and depends on the date of the deposit. This interest rate on your Flexi RD account varies from bank to bank and is different for people of different ages.
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Premature Account Closure
If you face any unplanned financial emergencies and are in need of urgent funds, then you can close your Flexi RD any moment and easily gain access to your funds. Some banks may even apply interest rates on the investments you made based on the duration you had the Flexi recurring deposit account. Other banks provide an interest rate that is 0.5% lower than the rate applied during the period you made deposits in your account.
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Loan Collateral
You can borrow against the funds in your Flexi RD account. Depending on the bank's policies, a portion of your total balance can be used as collateral for the loan. Typically, banks apply an interest rate that is 1% higher than the deposit rate. For short-term needs, this loan can be more affordable than standard personal loans.
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No Skipped Instalment Penalties
Some banks offer Flexi Recurring Deposit accounts where you are not charged any penalties if you skip making an instalment. This is great, as you may never know when there’s a financial emergency or an unavoidable circumstance where you won't be able to make a deposit to your RD account. But not every bank offers a Flexi RD account where you can have no penalties on skipped instalments.
Hence, it’s extremely essential to read all the documents and terms and conditions properly before opening a Flexi RD account with any bank. Make sure everything aligns with your financial goals and needs, and do your research properly.
RD vs Flexi RD: Which is better?
Choosing between an RD and a Flexi RD depends on your financial habits and flexibility needs. If you prefer a disciplined approach with fixed monthly deposits and guaranteed returns, an RD is a solid choice. This will help you become more financially responsible and even allow you to achieve your financial goal with more sturdiness. However, if you need flexibility in your deposit amounts while still earning interest, a Flexi RD offers the adaptability you might require. Consider your financial goals and saving patterns to decide which option aligns best with your needs.
Are you looking to cultivate a habit of saving regularly? Start building your wealth with the Freo Savings RD account!
FAQs
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How does a flexible recurring deposit differ from a regular recurring deposit?
In a regular recurring deposit, you contribute a set amount on a predetermined date each month. In contrast, a flexible recurring deposit offers more freedom, as you can vary both the deposit amount and the timing. Additionally, flexible recurring deposits allow you to skip a monthly instalment without incurring any penalties.
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What interest rates can I expect with a Flexi RD scheme?
Interest rates for Flexi RD schemes differ from one bank to another and are influenced by factors such as the principal amount and the duration of the deposit. Additionally, the interest on extra instalments is determined by the specific deposit date. It’s also worth noting that senior citizens often enjoy higher interest rates.
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Can I take advantage of an auto-renewal option with Flexi RD accounts?
Yes, you can. Many banks offer an auto-renewal feature for Flexi RD accounts, allowing for seamless continuation of your deposits.
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Will I incur a penalty if I skip an instalment in my Flexi RD account?
The answer depends on the bank you choose, as policies vary. It's essential to review the specific terms and conditions regarding penalties for missed instalments.
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Can I get a loan against my Flexi Recurring Deposit?
Yes, you can get a loan against your Flexi RD account.
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Is the deposit amount set in a Flexi recurring deposit?
No, in a Flexi recurring deposit, the deposit amount is not fixed, allowing for greater flexibility in your contributions.
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Is the deposit date predetermined in a Flexi recurring deposit?
No, the deposit date in a Flexi recurring deposit is not fixed, so you can choose when to make your contributions.
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Is there a nomination facility available for Flexi recurring deposits?
Yes, most banks offer a nomination facility for Flexi recurring deposits, allowing you to designate a beneficiary for your account.
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Can I choose an auto-renewal option for my Flexi recurring deposit?
Yes, you can select an auto-renewal facility for your Flexi recurring deposit, ensuring a smooth continuation of your savings.
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Can I miss an instalment for my Flexi recurring deposit without facing any penalties?
Yes, you can skip an instalment for your Flexi recurring deposit without penalties.
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Can minors open a Flexi recurring deposit?
Yes, minors can apply for a Flexi recurring deposit with the consent and assistance of their parents or guardians.
Are you looking to cultivate a habit of saving regularly? Start building your wealth with the Freo Savings RD account!
