Recurring deposit accounts enable users to save a portion of their income on a monthly basis. The amount in an RD account is locked for a set period of time. The deposited amount, as well as the interest earned on it, is returned to the account holder upon maturity. It is up to the user to choose the time period for which the amount is locked.Recurring deposit accounts enable users to save a portion of their income on a monthly basis. The amount in an RD account is locked for a set period of time. The deposited amount, as well as the interest earned on it, is returned to the account holder upon maturity. It is up to the user to choose the time period for which the amount is locked.

This blog will explain what a recurring deposit is, its features and benefits, and how to open one.

What is a Recurring Deposit Account?

A recurring deposit is a kind of term deposit that allows users with a fixed source of income to deposit a fixed amount of money every month to the recurring deposit account. After depositing the money, the user can earn interest on it. Although recurring deposit accounts and fixed deposit accounts are very similar, they differ in the following ways:

• Unlike Fixed Deposit that requires one to submit an amount for a particular period, a recurring deposit account requires one to submit the amount on a monthly basis for a locked period
• A recurring deposit account encourages people to build their savings by depositing a fixed amount every month for a particular period of time
• The facility to open a recurring deposit account is divided into short term, mid-term and long term periods. As per the chosen term, the interest paid by the bank will be also different
• Banks offer various types of recurring deposits for regular individuals, children, senior citizens, NRIs, etc., however, the interest rate on these accounts changes accordingly
• The tenure to open a recurring deposit account might vary from bank to bank
• Banks offer the flexibility to close recurring deposit account; however, a penalty has to be paid by the user

What are the Benefits of a Recurring Deposit Account?

Listed below are some of the top benefits of a Recurring deposit account-

Financial facility to save money

In contrast to FDs, which require a lump sum deposit, a recurring deposit account allows you to deposit a set amount of money every month for a set period of time. In exchange, the user receives a competitive interest rate on a recurring deposit account. It builds the habit of saving a particular amount of money every month.

Assured returns

Recurring deposit accounts are ideal for investing because they provide guaranteed returns on the principal amount.