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What is a Recurring Deposit Account and How it Works?

It’s important to save some of part of money earned. Savings can be made possible by keeping a part of money received or controlling excessive spending. There are different ways to save money and plan their future financial decisions. And to support that financial decisions people to maintain a savings account, fixed deposits and recurring deposits. The idea of savings is essential for the sake of managing a part of money which could be kept in a place, where it can be added with additional return.

What is a Recurring Deposit ?

A recurring deposit is one of the financial instruments, which is offered by the different financial institutions and banks. In this recurring deposit account one can save a part of their income on a monthly basis. And a sum of amount deposited in the name of a recurring deposit on a monthly basis, will be added with an interest return rate equal to the fixed deposit.

How Recurring Deposit works ?

There are certain levels of rules and regulations, which needs to be followed at the time of opening a recurring deposit account. Moreover, these deposits are incurred on a regular basis, and that is why it adds in an additional feature of savings and fixed deposit account.

1) Recurring Deposits are commonly regular and flexible

As it is known that all recurring deposit accounts are such type of account which are debited on flexible and regular basis. Therefore, an account holder owning a recurring account will be directed to save a part of their regular income. For example, a person can save a part of their income as a savings. And this kind of savings can be made at any point of time.

Also Read : What is Fixed Deposit ?

2) Interest rates in comparison to the given period of time

Most of the accounts opened in any type of financial institutions are presented with some interest rates. These interest rates are levied on recurring deposit on the basis of their fixed period of time. Moreover, all recurring deposit interest rates, manages a fixed and flexible rate of interest rates all the time.

3) Recurring deposit interest rates differ

All the financial institutions and banks present a different set of interest rates in terms of recurring deposits. Moreover, these recurring deposit accounts hold a nominal rate of interest. These nominal rate of interest levied on recurring deposit accounts are derived at the complete tenure of the account.

4) The penalty is chargeable at the time withdrawals in advance

Similar to the fixed deposit account, even recurring deposit account holder can suffer a part of a penalty at the time of advance withdrawal of money. But there are some financial institutions which allows an account holder to withdraw a sum of money from their account, without any penalty charges.

And the bottom line is that all this information about recurring deposits, might encourage people to invest in such accounts. Additionally, it acts a savings plan which explores all fixed deposit investment services. And a person can save a small amount of his or her savings for their future financial security.


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