Finding it hard to manage too many FDs? The solution is not closing any of them but managing them the right way. So, here are 5 smart tips to take care of multiple fixed deposit accounts in the new year.
Manage Interest Income
It is a good idea to reinvest the fixed deposit interest if you are receiving the highest FD interest rates. That way, you can earn more interest annually.
Besides, trying interest payouts on your other fixed deposits is also recommended. Then you can use the earned interest to fund expenses or try investing in other avenues.
Reinvestment is most suitable for deposits of a longer tenure.
Try the Sweep-in Facility
Opening a sweep-in account is a good way to minimise any loss of interest. The predetermined amount that you are allowed to withdraw in this case is low.
With the auto sweep facility, you can link multiple FDs to your investment/savings account for easy automated processing of payments.
In this facility, the amount exceeding the specified limit is automatically moved to your savings account. Thus, you can earn higher interest on your fixed deposits.
Make a Deposit Hierarchy
When you invest in fixed deposits, always prioritise the investment periods. Consider breaking the invested sum reasonably into small blocks. You can arrange them according to the periods for which you wish to invest them. For example, if the investment amount is ₹5 lakhs, consider making 2 FDs, each of ₹2.5 lakhs. Invest in them for 2 years and 5 years, respectively.
You will find this better than putting all your money in one FD of a specific tenure. Plus you can have a backup for emergencies when you can break the smaller deposit while keeping the bigger one intact.
You can break a fixed deposit when interest rates fall. Then you can invest the interest earned at a lower interest in another deposit at a higher rate.
Make sure to choose the tenures as per your fund needs to avoid premature withdrawals as much as you can.
Make the Most of Technology
Always use the net banking facilities offered by the bank that holds your FDs. Then you can manage even multiple fixed deposits online easily. You can digitally check, book or redeem the deposits online. With a good bank, you need not worry about any online security risks.
If they are held in different banks, you can use apps, such as ‘One View’ to view and manage multiple FDs online, including those of your family members.
Use the Overdraft Facility
If you choose the best bank, you can enjoy the highest FD interest rates. Plus if you use an overdraft (OD) option against a deposit with the lowest interest rate, you can borrow funds at 1-2% higher than the given rate. This way, multiple FDs work great with this facility. So, consider using OD, especially to finance any emergencies, eyeing the current situation.
Make sure to follow these useful tips to start managing all your FD accounts effectively, hassle-free.