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Question
Distinguish between the following:
Fixed deposit account and recurring deposit account
Solution
| Fixed deposit account | Recurring deposit account |
| A Fixed Deposit Account is 'a type of bank account under which a certain fixed account is deposited for a definite period. | Recurring Deposit Account is a type of account under which a certain fixed amount of money is deposited at regular interval for a fixed duration |
| No withdrawal is permitted before the date of maturity. However, a certain amount by way of loan can be granted against the security of the Fixed Deposit Receipt (FDR). | Withdrawal or payment is obtained only on the expiry of the fixed period. If the amount withdrawn earlier, the rate of interest will be less than Applicable. |
| Accountholder gets only Fixed Deposit Receipt f FDR). | Only Pay-in-slip book and Passbook are issued to the account holder. |
| Banks offer higher rates of interest. Longer the period, higher will be the rate of interest and vice versa Interest is paid periodically or on maturity. | Interest is paid on the amount deposited into the account. The rate of interest is higher than Savings Account but less than that is paid on Fixed Deposit Account. Interest is paid on maturity only. |
| This account is suitable for individuals or traders or social institutions having surplus money not immediately required by them. | This account is suitable for the lower and middle-class people who desire to build up a substantial amount through small but regular savings accumulated with interest thereon. |
| In fixed deposit account, the entire amount deposited only once at the beginning of fixed period. | In the Recurring deposit account, the depositor is required to deposit fixed amount several times each at regular interval of time. |
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