The Impact of Compound Interest and How FD uses it

Multiplying funds seems like a fix, but it is not! Now, with the help of compounding, you can gain extra savings from your fixed deposit plan. Investing your capital is a secure and safe option as they offer fixed FD interest rates at the time of maturity, a predetermined factor.

FDs offer guaranteed returns at high-interest rates, are easy to monitor, and allow early withdrawal. They also offer special rates for senior citizens and have flexible tenures and one can also reinvest the matured amount into a new investment, leading to an increase in savings.

You can also avail of a loan of up to 95% against your fixed deposit amount, making it a dependable instrument. Now, it is totally upto you to either redeem or extend your deposit term.

What is a fixed deposit?

A fixed deposit is an investment option where the interest rate is predetermined and remains the same throughout the entire tenure, allowing assured returns on your assets. You can decide which fixed deposit to invest in by searching the fixed deposit calculator online.

They are comparatively liquid assets, allowing you to withdraw funds before maturity. They are one of the oldest investment instruments offered by all financial institutions, with varied tenures, ranging from a month to ten years.

What do you mean by compound interest?

Compound interest is the interest that you earn on another interest. The compound interest for an amount depends on principal and interest gained over periods.

It differs from simple interest, which is not added to the principal while calculating the interest during the next period. This complex calculation is made easy with the help of anFD calculator.

How does compound interest impact Fixed Deposits?

●     Returns

Compound interest increases your returns because you can earn interest only on the principal amount in case of simple interest. Still, compound interest allows you to make interest on the principal amount and the previously earned interest.

●     Growth in investment

As interest is added to your investment regularly, depending on the compounding frequency, your investment also grows over time. This can positively impact long-term investments as your money continues to earn interest.

●     Interest rate

If your interest rate is low, the effect of compounding is not so visible. Conversely, the impact is more significant when the interest rate increases, even slightly. You can check and calculate FD interest ratesonline using a calculator.

●     Time

The impact of compounding depends on the time the deposit has been locked in. The longer you keep your money in a fixed deposit, the more visible the compounding effect becomes, giving higher returns over time.

●     Frequency

The compounding frequency can vary depending on the terms and conditions of the fixed deposit. Most common compounding includes annual, semi-annual, quarterly, monthly, etc. The more frequently the compounding is done, the more impact it will have.

Which is the best app to invest in FD?

I invested in a fixed deposit a year ago through Bajaj Finserv. I noticed my increasing returns within a year as they offer higherFD interest ratesthan their competitors.

Their application is extremely easy to use, and their calculator gives precise and accurate results. They have the highest safety and security rating, ensuring your funds are secure.


So, if you want to invest and yet be safe, fixed deposits are the way to go about it! You will get excellent and assured returns because of a compound interest rate at a predetermined rate, with no or low risk. You can also use an FD calculator, which will help you maximize your returns and achieve your financial goals more effectively.

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