Recurring Deposits (RDs) offer a disciplined approach to savings for many individuals, serving as a cornerstone for those aiming to build a financial cushion without bearing the risks associated with equity investments. This article shares the details of Post Office RD vs Bank RD to help you make an informed choice.
What is Post Office RD?
When considering the various avenues for savings, the Post Office Recurring Deposit stands out as a government-backed option, boasting stability and consistent returns. This savings scheme is part of the Post Office Savings Scheme portfolio and is tailored as a mid-term investment horizon, mandating that investments remain locked in for at least five years.
Features of Post Office RD
When evaluating Post Office RD vs Bank RD, potential savers must understand the security and specific features of a Post Office RD:
- The Post Office RD demands a fixed monthly investment over five years, promoting disciplined savings.
- It caters to the small investor segment by allowing investments from as low as ₹100 monthly, increasing in multiples of ₹10, with no cap on the maximum investment, making it an inclusive financial instrument.
- Joint accounts for two adults are permissible under this scheme, and even minors can be included, with the provision to operate multiple accounts.
- A penalty is imposed for missed monthly deposits, calculated at ₹1 for every ₹100, ensuring adherence to the savings plan.
- The scheme offers flexibility after one year, permitting withdrawals up to 50% of the account balance, thus balancing liquidity with savings discipline.
What is Bank RD?
A Bank RD is a recurring deposit scheme offered by banks, allowing individuals to deposit a fixed amount every month into their RD account, earning interest at a rate determined by the bank. This scheme is ideal for those who save regularly while earning a higher interest rate than a savings account.
Features of Bank RD
Here are some features that might sway your decision when contemplating Bank RD vs Post Office RD:
- With a minimum deposit period as short as six months and a maximum extending up to ten years, Bank RDs offer flexibility to suit a variety of saving timeframes.
- The returns on Bank RDs are on par with Fixed Deposits, often outpacing traditional Savings schemes, making them an attractive option for those seeking better growth in their savings.
- Bank RDs are not just savings tools; they can also act as collateral. You can secure a loan of about 80% to 90% of your deposit value, which can be a lifesaver during financial emergencies.
With Axis Bank's Recurring Deposit, you can start with as little as ₹500 and choose a tenure that suits your financial goals, from 6 months to a decade. Plus, with Axis Bank's RD, you benefit from regular savings habits and attractive interest rates and earn Axis eDGE Rewards, adding a touch of delight to your disciplined investment.
Comparison between Post Office RD and Bank RD
In the Bank RD vs Post Office RD discussion, key differences emerge in tenure, interest rates, renewability, and liquidity.
Post Office RDs offer a fixed 5-year term with interest rates revised quarterly, catering to those seeking predictability. In contrast, Bank RDs provide a wider tenure range from 1 to 10 years and generally more stable interest rates, appealing to a broader audience with varied financial goals.
Bank RDs also allow for renewability, offering flexibility to extend your savings plan, unlike the fixed term of Post Office RDs. Additionally, Bank RDs typically offer better liquidity options, with loans or overdrafts up to 95% of the deposit, compared to up to 50% withdrawal after one year with Post Office RDs.
Also Read: Exploring different types of Recurring Deposit (RD) Accounts
The choice between Bank RD or Post Office RD depends on your need for flexibility, stable interest rates, and immediate access to funds, as each option serves different financial preferences and goals.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
