Fixed Deposits (FDs) are one of the most popular and trusted investment options in India. Safe, predictable, and easy to understand — that’s how they’re often portrayed. But are they really as perfect as they seem? The truth is, there’s a lot banks don’t tell you. Let’s bust some of the biggest myths around Fixed Deposits!
Myth 1: Fixed Deposits Always Offer the Best Returns
Reality: While FDs do offer guaranteed returns, they aren’t always the best when you consider inflation. Imagine parking your money in an FD at a 6% annual interest rate while inflation is at 7%. You’re actually losing purchasing power every year. Many other investment options like mutual funds, bonds, or even high-yield savings accounts can offer better inflation-adjusted returns over time.
Myth 2: You Can’t Lose Money in an FD
Reality: FDs are considered safe, but they aren’t completely risk-free. In the rare case that a bank goes bankrupt, your FD is only insured up to ₹5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC). If your FD amount exceeds that, the remaining money could be at risk.
Myth 3: Breaking an FD Means Huge Penalties
Reality: While premature withdrawal does attract a penalty, it’s often not as scary as banks make it sound. Most banks charge around 0.5% to 1% of the interest rate as a penalty. Plus, many banks now offer flexible FDs where you can withdraw part of the amount without penalties.
Myth 4: You Should Always Choose Long-Term FDs
Reality: Long-term FDs often lock your money at a fixed interest rate, which could be disadvantageous if rates rise later. Shorter-term FDs or laddering your FDs (investing in multiple FDs with different tenures) can help you take advantage of changing interest rates.
Myth 5: Senior Citizen FDs Are Always Better
Reality: Banks offer higher interest rates on FDs for senior citizens, but that doesn’t automatically make them the best option. Sometimes, better returns and tax efficiency can be found in senior citizen savings schemes or debt mutual funds.
The Bottom Line
Fixed Deposits can still be a great part of your investment portfolio, but only if you understand the full picture. Don’t just go by the sales pitch at your bank — do your own research and consider your financial goals before locking in your money.
