Fixed Deposits (FD) are the most straightforward and uncomplicated investment avenue for investors of all ages. Anyone with even a minimum FD investment can earn reasonable and assured earnings. Since bank FDs are backed by the government, they offer you much more security on your money than market-linked investment options. The interest a depositor earns on a Fixed Deposit investment is easy to calculate using a Fixed Deposit calculator. In the article below, let’s learn more about the benefits of a Fixed Deposit calculator.
What is a Fixed Deposit Calculator?
Banks decide the interest receivable on a Fixed Deposit investment when the depositor opens an FD account. This interest rate remains constant for the entire term of the Fixed Deposit. As the interest rate is well-known in advance and does not change, the depositor can also calculate the returns earnings. A Fixed Deposit calculator helps with this. The depositor can use the Fixed Deposits calculator to calculate the interest they will earn. The interest rate varies based on the FD tenure, the amount invested, and the scheme under which the investment has been made.
Fixed Deposit Interest Calculation
As stated above, the interest earned from an FD investment depends on the type of FD deposit investment you make. Primarily, there are two types of FDs; Cumulative FDs and Non-cumulative FDs.
A cumulative Fixed Deposit is one under which the bank pays interest on an FD on a cumulative basis. The interest the investor earns on the FD investment is reinvested along with the principal amount to give interest on interest to the investor. At maturity, the investor receives the entire principal amount and the interest earned during the term.
A non-cumulative or periodic interest payout is one where the investor receives the interest payout monthly or quarterly. Investors can use these regular payments to meet financial commitments, like rent or credit card bills.
How a Fixed Deposit Calculator Works?
A Fixed Deposit calculator gives results based on the information provided by the customer. When customers enter the amount they want to invest and the investment time, the FD calculator calculates the interest earnings. The return is based on the applicable interest rate and the type of FD investment you choose. With an FD calculator, investors can foresee the interest they’ll earn by depositing their money for different tenures. It is wise to use the tool before investing to choose the duration and investment amount that would offer the desired returns.
You may also read – Types of fixed deposit
Steps to Use a Fixed Deposit Calculator
Using a Fixed Deposit calculator is easy. Here is what you need to do:
- Select if you are an existing or new customer with the bank.
- Choose between the senior citizen or general category options based on your age.
- Choose the type of FD based on the payout pattern you desire.
- Enter the date on which you would like to open your FD account.
- Enter the term of the deposit.
- Enter the amount you want to invest in your Fixed Deposit scheme.
- The calculator will automatically feed in the interest rate applicable based on the above information.
Hit the calculate button and the Fixed Deposit calculator will show the amount you will receive from your FD investment.
Benefits of Fixed Deposit Calculator
The manual calculation for Fixed Deposit returns can be tedious and time-consuming. There’s also a high probability that you may make calculation errors. This is why a Fixed Deposit calculator is recommended, as it offers several benefits to the depositor.
- It simplifies complex interest payout calculations with a click of a button.
- The calculator enables the depositor to compare the interest they can earn for different combinations of the principal amount, Fixed Deposit tenure, FD scheme, and type of FD.
- Compare the payouts you can earn by investing in different Fixed Deposit schemes.
- The calculator is a free tool and can be used unlimited times.
A Fixed Deposit calculator helps you know the FD earnings in advance. It empowers you to plan your financial goals according to the expected earnings.