Fixed Deposit: People investing in FDs should be careful, know this important thing before investing..

Fixed Deposit (FD) is still one of the most popular schemes to invest your money in the right place. Many people rely on FDs to invest their money safely. In recent months, almost all private and government banks have increased the interest rates on FD, making it even more attractive.

However, while investing money in an FD gives you many benefits, you may also have to bear some disadvantages. In such a situation, let us know what disadvantages you may have to bear by investing money in an FD.

Fixed Interest Rate-

One of the main disadvantages of a Fixed Deposit (FD) is its fixed interest rate. The interest rate that is fixed at the time of opening the account, you get returns at the same rate till maturity. This means that even if interest rates increase in the market, you will continue to get interest at your old, low rate, which may lead to a loss of potential earnings.

Low Returns-

One of the disadvantages of investing in FD schemes is that FDs offer a fixed interest rate, which gives very low returns. Generally, this return is also less than that of mutual funds or other investment options.

Lock-in Period-

Once you invest in an FD, your money is locked for the period of the deposit. This means that you cannot use your money until that period is over. Even if you are in an emergency.

TDS-

The interest given to you on FD comes under the purview of tax. This simply means that you will have to pay tax on the interest received. The interest on FD is counted as Income from Other Sources.

Inflation-

Most of the time, the interest on FD is less than the inflation rate. In such a situation, if the FD does not give more interest than the inflation rate, then you will not get much benefit by investing in it. If the inflation rate is more than your FD interest rate, then the value of your money will decrease over time.

Liquidity-

If you ever break your FD when needed, then you have to pay a premature penalty on it. Apart from this, you do not have to pay any capital gains tax on FD.

Risk of bank bankruptcy-

FD is considered a safe investment. However, there is also a risk of bank bankruptcy in it. If your bank ever goes bankrupt, then you can lose your entire investment or part of it.

Penalty for withdrawing money before the time-

If you withdraw money from the FD scheme before the time, then you may have to pay some money for it.

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