What Is a Term Deposit? Features, Benefits, and Types

A Term Deposit is one of the simplest and safest ways to grow your savings. It allows you to lock in your money for a specific period and earn returns on it. Whether you’re new to investments or a seasoned investor looking for a stable investment option, Term Deposits are a good option for you, since they offer security and build financial discipline. This blog post explains everything you need to know about Term Deposits, including features, benefits and the different types that are available.

What is a Term Deposit?

A Term Deposit involves depositing a lump sum with a bank for a specific duration. During this period, your money earns fixed or variable returns. Unlike a Savings Account, where you can withdraw funds at any time, Term Deposits require you to keep the money untouched until the end of the tenure unless you opt for early withdrawal. This makes it an ideal choice for investors who want to invest in a disciplined manner, without impulsive spends.

Features and Benefits of Term Deposits

1. Interest Rate and Tenure

Term Deposits can offer either a fixed interest rate or a variable (floating) interest rate that depends on market conditions, allowing flexibility in returns. The tenure can also vary depending on the type of Term Deposit.

2. Steady Income

Some types of Term Deposits allow investors to receive a steady income from their investments. For example, you can receive regular interest payouts by choosing ICICI Bank’s Monthly Payout FD, which is particularly useful for retirees seeking a consistent income.

3. Flexibility During Emergencies

Term Deposits offer flexibility during financial emergencies. You can opt for early withdrawal, but it may attract a penalty. Alternatively, you can secure a loan or overdraft against the deposit, ensuring liquidity without breaking the investment.

4. Tax Benefits

Some Term Deposits, such as Tax Saver FDs, allow you to claim deductions under Section 80C of the Income Tax Act.

5. Accessibility and Convenience

Term Deposits are an accessible option for almost all investors, due to their low minimum deposit requirement. Moreover, the auto-renewal feature available with some types of Term Deposits ensures that your investment continues to grow smoothly by automatically renewing the deposit at maturity.

Types of Term Deposits

Here are the common types of Term Deposits that you can choose from:

1. Fixed Deposit (FD)

A Fixed Deposit is a popular choice for those seeking secure investments. You invest a lump sum amount for a fixed period, earning interest at a pre-determined fixed rate. Once the deposit matures, you receive your principal amount along with the interest earned, making it a safe and predictable savings option.

2. Recurring Deposit (RD)

Recurring Deposits are perfect for individuals who prefer saving small amounts regularly. By contributing a fixed sum every month, you build your savings gradually while earning interest. At the end of the term, you receive the total amount saved along with the interest, making it an excellent choice for disciplined savers.

How to open an FD?

The process of opening an FD with ICICI Bank is very simple. Here are the few ways through which you can open an FD:

Internet Banking

1. Log into your Internet Banking account

2. Go to Bank Accounts > Deposits

3. Select ‘Open Fixed Deposit FD’

4. Choose the FD type

5. Enter the deposit amount (minimum ₹ 10,000)

6. Select the tenure, interest payout option, whether or not you wish the deposit to be auto-renewed

7. Select the Account for payment and agree to the terms

8. Click on ‘Start FD’ to complete the process.

iMobile App

1. Log into the iMobile app using your credentials

2. Go to ‘Accounts & FD/RD’ and select ‘Fixed Deposits’

3. Click on ‘Open FD’ and enter the required deposit amount (minimum ₹ 10,000)

4. Choose the FD type, tenure and interest payout option

5. Select the Account for payment and agree to the terms

6. Enable the auto-renewal facility if required and submit your request

7. If you require assistance, you can opt for help from an ICICI Bank representative.

Branch Visit

1. Visit any ICICI Bank Branch

2. Fill out the FD application form

3. Submit the completed form along with your KYC documents and the deposit amount.

How to open an RD?

Here are a few ways using which you can open an RD with ICICI Bank:

Internet Banking

1. Log into your Internet Banking account

2. Go to Bank Accounts > Deposits

3. Select ‘Recurring Deposit’ and click on ‘Open Recurring Deposit’.

iMobile App

1. Log into the iMobile app using your credentials

2. Navigate to the ‘Accounts & FD/RD’ section, then select the ‘Recurring Deposit’ option

3. Click on ‘Open RD’. 

Factors to consider before investing in a Term Deposit

While Term Deposits are simple, it’s important to consider a few key factors before investing in them. First, compare interest rates of different types of Term Deposits to secure the best returns. Check the lock-in period to ensure that you won’t need access to the funds during the deposit’s term. It’s also crucial to understand any penalties for early withdrawal to avoid unexpected costs. Lastly, check how the deposit’s returns compare with the inflation rate.

Why choose a Term Deposit?

Term Deposits are perfect for individuals who want to park their money in a low-risk investment option and earn stable returns. Whether you’re saving for a specific goal, planning your retirement or looking for a tax-saving instrument, Term Deposits are a reliable option.

Conclusion

A Term Deposit is a low-risk investment option for those who value financial security and stable returns. Understanding what a Term Deposit is, its features and its types will help you make informed decisions that align with your financial goals. Whether you’re a conservative investor or want to plan for the future, Term Deposits provide a solid foundation for financial growth. Take the first step today and invest in a Term Deposit to secure your financial well-being.