Managing Multiple Fixed Deposits – A Complete Guide

Managing Multiple Fixed Deposits

Published on March 1st, 2023

When it comes to investing one’s hard-earned savings, even the most intrepid of individuals prefer to play it safe, opting for the tried and tested.

The enduring popularity of fixed deposits, for instance, is a testament to the trust people continue to repose in this traditional investment, despite the easy availability of other investments offering ostensibly higher returns.

In fact, many individuals secure their savings in multiple fixed deposits, ensuring the creation of a financial cushion for their future. If you already have multiple fixed deposits, or are planning to book, here’s everything you need to know about managing multiple fixed deposit (FD) accounts.

Why You Should Open Multiple Fixed Deposits

Have you been mulling over opening more than one FD? Well, here are 3 good reasons to go right ahead.

Save Tax Money

TDS (Tax Deducted at Source) is 10% if the annual interest income from the FD in one bank exceeds INR 40, 000. However, you may avoid this TDS if you open several FD accounts in different branches of the same bank, or book FDs in different banks.

Fulfil Your Liquidity Needs

Choosing your FD schemes – cumulative or non-cumulative – and investment tenures thoughtfully can help meet your short-term and long-term liquidity and cash-flow needs.

Have A Backup For Emergency

Should you ever face an unforeseen financial crisis, your FD accounts could serve as a back-up. You could, for instance, choose to break one or more of the smaller deposits and withdraw the requisite funds, keeping the bigger ones undisturbed.

Simple Tips For Effectively Managing Multiple Fixed Deposits

Having multiple fixed deposit accounts isn’t without its fair share of challenges. Investors may face difficulties such as frequent follow-ups about renewal, interest credit, TDS deduction, and having to keep a tab on varying maturity dates. Here are a few tips to help you effectively manage your multiple FDs and maximise your returns:

  • Deploy Technology: Keeping track of numerous fixed deposits with varying fixed deposit interest rates can be tricky. Take the help of free applications that can be downloaded on your device to view and manage your FDs.
  • Adopt Fixed Deposit Laddering: This strategy entails spreading your lump-sum investment over multiple smaller FDs with varying maturity periods. This allows you to earn better returns and fulfil your liquidity requirements without having to resort to premature withdrawals.
  • Avail of Overdraft Facility: In case you ever need urgent funds, you may avail yourself of an overdraft (OD) facility. While a regular loan comes with a higher interest rate, the OD facility enables you to borrow money at 1% to 2% more than your fixed deposit interest rate. This will ensure your FD remains intact even as your cash needs are answered.
  • Open a Sweep-in FD: If you have multiple FD accounts, one or two of those can be a sweep-in FD. A sweep-in FD allows investors to invest their excess funds to earn higher returns and dip into the FD if the need arises, minimising the interest lost.
  • Opt for Different FD Plans: Try and opt for cumulative FDs with the highest interest rates for deposits with longer tenures. You may choose interest pay-outs – non-cumulative FDs – for your other FDs and use the interest earnings to invest in other avenues, or for personal expenses.

While the above-mentioned tips will greatly help you manage a number of FD accounts with relative ease, it is better not to have more than 6 or 7 FD accounts.

To conclude, putting away a portion of your surplus funds into more than one fixed deposit can be highly lucrative, both in the short and long term. Book an FD today and reap the benefits tomorrow!

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