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Understand Key Differences – Fixed Deposit Accounts Vs. Savings Accounts

Individuals looking for financial products to park their savings safely find fixed deposit (FD) accounts and savings accounts suitable. These are secure investment options with banks considered by most individuals. Both accounts are interest-bearing accounts and provide decent returns but a change in the market rates impacts both accounts differently. These two accounts can be differentiated on various fronts. Explore the post to understand the difference between savings and an FD account.

Difference Between Savings Account and Fixed Deposit Account

What is a Fixed Deposit Account and Savings Account – Purpose 

  • A savings account is a type of demand deposit account. It is the basic need to access various banking and financial services, including online investments. Typically, individuals open a savings account to keep their savings for the short term and meet their day-to-day requirements. 
  • On the contrary, an FD account is an investment account to deposit spare funds. Individuals who want to keep spare funds safe and earn assured returns can open an FD account.

Interest Rate

  • The interest rate on a savings account keeps changing with the change in RBI’s policy and economic conditions in the country. The interest is calculated on a daily basis on the account balance. On the other hand, funds deposited in an FD account provide returns at a fixed interest rate over the tenure. Once the amount is deposited in an FD account, the interest rate remains the same once set by the bank for the entire lock-in period. There will be no change in the interest rate even if the market rates decline. 
  • It is the key difference between a savings account and a fixed deposit account. FDs are known for guaranteed returns. The FD interest rate is higher than savings deposits and makes most individuals keep their funds in an FD account. Banks provide an FD interest calculator for free to calculate interest earnings on an FD before parking funds. 
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Tenor and Withdrawal

  • A savings account allows account holders to deposit or withdraw funds whenever required. They can deposit or withdraw funds in person in the bank branch or via an ATM. There is a maximum cap/per-day limit or a monthly limit to withdraw money from a savings account. 
  • On the other hand, customers opening an FD account deposit their funds for a certain period. It is a lock-in period/ tenure for FDs that ranges between 7 days to 20 years. They need to wait to withdraw funds until the tenure is over. However, banks allow their customers to withdraw funds in an FD account prematurely against a penalty. Customers can use an FD calculator to choose a suitable tenure as per their financial goals that they want to achieve after a certain period using the FD investments.


Banks allow customers to choose suitable savings accounts as per their eligibility and requirements. Different types of savings accounts include the following: 

  • Basic Savings Account
  • Woman’s First Savings Account
  • Digital Savings Bank Account
  • Prime Savings Account
  • Senior’s First Savings Account
  • Advantage Savings Account
  • Non-resident External (NRE) Account
  • Non-resident Ordinary (NRO) Account and others. 

These savings accounts are offered to access numerous banking services and come with different advantages.

Bank can offer the following type FD accounts to their customers:

  • Regular FD Account: Any Indian citizen aged 18+ can open a regular FD account with a bank. Individuals can open a minor FD account also for their children.
  • Senior Citizen FD Account: It is a special FD account for senior citizens aged 60+. This FD bears a higher rate than a regular FD.
  • Tax-savings FD Account: These are the FDs offered with the only tenure of 5 years offering tax benefits of up to Rs.1,50,000 in a financial year under Section 80C, Income Tax Act, 1961.
  • Recurring Deposit Account: Individuals who want to accumulate funds and want to earn fixed and high interest on deposited funds can open an RD account and keep depositing a fixed amount every month.
  • NRI FD Accounts with an NRE or NRO Savings Account: NRI (Non-resident Indians) can also take advantage of high and fixed interest rates using their savings accounts. 
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These are the types and differences between a savings account and a fixed deposit account. 

Choose a bank account – savings or fixed deposit account – as per the availability of funds and purpose of deposit with renowned banks. Individuals who want to inculcate the habit of savings may find a savings account a suitable choice. Contrarily, an individual having a lump sum amount may look for the best FD account offering a high-interest rate. The savings account interest rate can be as high as 7%. The FD interest rates can go up to 7.8% with reputed banks in India.