Multiple Fixed Deposits undoubtedly come with a plethora of added benefits, but handling them the right way isn’t as easy as ABC! Let’s run a glance through the following tips to handle multiple Fixed Deposits in the most profitable way.
1. Interest Income Management
Make room for reinvestment of interest for the Fixed Deposits that pay the highest rate of interest. This will furnish you with greater interest every year. You can also go for an interest payout for other Fixed Deposits and utilize the interest for your expenses or invest the same in other avenues. However, you must keep in mind that reinvestment is only fruitful if you opt for longer tenure. For that matter, you can choose shorter compounding period deposits, too.
2. Break The Deposits
Sweep-in account is a great option where the permitted predetermined withdrawal amount is low, which leads to minimized interest loss. In general, when it comes to a sweep-in account, withdrawals are permitted only in multiples of Rs. 1,000 or Rs. 5,000. Opt for a bank that offers lower multiples, most preferably, in multiples of 1. There are banks that let you break the Fixed Deposit with lowest interest, to reflect a reverse sweep into your Savings Account.
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3. Ladder The Deposits
In a scenario where interest rate is going down, having multiple Fixed Deposits with different tenures can lead to greater returns. Breaking the Fixed Deposit is a great way to earn the lowest rate of interest to invest at a higher rate. Keep the tenures aligned with your fund requirements avoiding premature withdrawals to a good extent.
4. Befriend Technology
Being a holder of deposits in a single bank, you can get your hands on the net banking service to redeem, view or simply book Fixed Deposits online. In case you hold them in different banks, make use of apps like ‘One view’ to view and manage several Fixed Deposits. This tool gets you a summary of your Fixed Deposits including those of your family members. The service mostly comes free with real time data. Being a view-only tool, it’s free from security issues.
5. Utilize OD
In case of emergency fund requirement, make use of the overdraft (OD) facility. Multiple Fixed Deposits work well in this case. With this facility, you get to borrow funds at 1- 2% above the rate of interest on your Fixed Deposit. Presently, the interest rates range from 6% to 7% for a tenure above one year. You can opt for an OD against your Fixed Deposit with the least interest, implying that you get money at 8-10% of interest rates and loans at 12%.
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In spite of the benefits, handling a lot of Fixed Deposits can get messy. So having no more than seven to eight accounts is suggested. Also, splitting FDs is a complete no-no as then amounts become very small especially if the Fixed Deposits are tenured over a year. This may lead to reduction of the potential interest you could earn. So, optimize the funds keeping the above tips in mind and be a winner in the monetary sphere!