Why making FD is better option than keeping money in savings account, this analyst explains

We have heard multiple times, save first and then spend. But does that actually happen? Even if it happens, do we do it right? If you feel that money in your bank savings accounts is being saved, you are probably wrong with majority of your bank accounts connected with Paytm, Google Pay etc.

Kushal Gupta, Senior Research Analyst at Zee Business, said that the moment you see something interesting, you tend to take out your phone, scan and pay. So, money in your savings account is as good as cash now with technology coming in.

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So, if you are confused what is to be done with spare cash in your savings account, here is one simple solution, until you find a better investment vehicle.

Make FD for a specific duration (mentioned below), instead of keeping in savings account, he said. Why? Let's look at this first.

Savings account interest rate:

Axis Bank: 3 percent

HDFC Bank: 3 percent

Kotak Bank: 3.5 percent

Kushal said that now, with inflation rate at 6 percent, clearly one would not be interested in keeping money in savings account, although it is risk-free and available on demand.

However, as I explained, that money in savings account is equal to cash in hand now. So, you can book an FD instead, so that there is a lock-in feel to avoid impulse cash outgo, risk-free instrument, he added.

FD rates (indicative)  

Bank     180    181    390      penalty  

Axis       4.4%  4.4%   5.1%   1%

HDFC     3.5%  3.5%  3.5%    1%  

Kotak     4.4%  4.4%  4.8%   0.5%  

Conclusion:

1. Do a fixed deposit majorly for less than 181 days: no penalty.

2. Penalty charges is 0.5 percent for more than 180 days.

So, by doing this, you can withdraw FD when you really need it and avoid unnecessary spend, Kushal concluded.