Fixed Deposit (FD) vs. Recurring Deposit (RD) – What’s the difference?
In a Fixed Deposit (FD) Scheme, you deposit a fixed amount once and earn interest on it for the defined tenure.
‘Depositing an amount ONCE’ is the keyword here.
However, in a Recurring Deposit (RD) scheme, you deposit a fix amount every month for the predefined tenure.
Technically, RD can be thought of multiple small FDs.
Rather than making a deposit once, you make deposits multiple times during the time frame.
Why would you do that?
Because you don’t have lump sum amount to save in an FD.
But you may have spare cash every month which you can divert to an RD and earn an extra return.
So you set up an RD that moves the defined amount each month on a fixed date, from your account to an RD account.
And that gives rise to the next challenge.
What if there’s not enough cash in your account on the said date every month?
Welcome Flexible Recurring Deposit
That’s where flexible RD comes as the savior.
Unlike a normal RD, you don’t need to commit to an amount or a saving date each month.
You just open the RD account and deposit the money as and when you have it, how much you have it.
No deposit dates. No minimum limits. No end targets.
About ICICI Bank’s iWish
ICICI Bank’s iWISH is probably the first flexible RD product to hit the market.
I have been using iWish for more than 5 years now and it’s truly a great product from their stable.
The end user gets lot of flexibility to plan and manage his savings, without getting tied to monthly deposit commitments.
iWish comes as part of your Saving Account with ICICI Bank and you can use it as soon as your account gets activated.
How to start investment with ICICI Bank’s iWish
Once you login to your ICICI Bank portal, go to “My Accounts” >> “Deposits”
Under ‘Deposits’, click “iWish- Flexible RD”.
Click on “Go to iWish” to browse your iWish account.
Here, you can monitor your existing iWish RDs, manage them, close them prematurely and open new flexible RDs.
Click on “Create iWish” and select the type of goal for which you want to save.
These goals are just to give a sense of purpose to you and have no bearing on the returns you will earn on your deposit.
In fact, I think ICICI bank uses these goals intelligently to understand where you are planning to spend next and pitches you with relevant offers from time to time.
For example, if you select “My Dream Vehicle” as the iWIsh goal, you will start seeing ads for Vehicle loan from ICICI Bank.
That’s one reason why I select all my goals as ‘Others’ so that they don’t pitch me with loan offers.
Once you have selected the goal, key in the important details like
- Target saving amount
- Initial deposit
Even if you miss the target saving amount, there is no impact on your account. However, if you achieve the target, you can’t add any more funds to that goal.
Chose the tenure carefully. It has to align with the duration in which you anticipate the need for funds, plus the interest rate offered for that time frame.
Since I am using iWish to maintain my emergency fund, I select the minimum tenure that gives me the maximum interest rate. Check the interest rate chart of ICICI Bank here.
Also, never tick on the Auto Contribute feature.
By doing that, you will defeat the purpose of a flexible recurring deposit by committing to deposit a fixed sum every month. You lose the flexibility with that option.
All in all, iWish is an awesome saving product offered by ICICI Bank.
In fact, I have seen my saving rate going up after I have started using iWish.
Reason being that the entire system is gamified with very clear, intuitive visual action cues.
These cues motivate the end user to save more without getting overloaded with too much information.
I would give 5 out of 5 to iWish for it’s simple and elegant design, easy to follow user interface and gamification of the system.
Have you used iWISH? How’s your experience with it? Do mention in the comments below.