FDs – or we could say Fixed Deposits, are not just offered by banks. You know this, given the title of this article is – “Which is Better, a Post Office FD or a Bank FD?” But, here is another tip – even non-financial institutions offer you fixed deposit schemes. We have all been there; we have all been pacing the floor and what is the right option to choose. This happens especially when you have to lock your money there for a long period of time, and you do not want to be disappointed with the returns. So, you don’t have to worry about that now – we can get a greater perspective here.
Here, we can talk about two choices when it comes to FDs, and that is whether it is a post office or a bank.
How to Choose Between a Bank FD and a Post Office FD?
As you know, FDs are known to be the safest investments for any kind of investor out there, especially in middle-class India. They give you the option of investing in short-term or long-term, and you can choose based on your need.
While you compare the FD rates offered by a bank and by a post office, you will also be considering the tenure of the investment.
Let’s just say you choose to invest in the post office for five years. The interest rate that the post office will give you is 5.5% for a year. You will have similar features for your post office FD and your bank FD.
Now, the second part of this comparison comes to which bank you would choose. Since we are just taking up an example now, let’s say you choose to invest in Punjab National Bank. The Punjab National Bank fixed deposit interest rate for the next five years is going to be 5.95% for a year.
What would be your choice? Without a second thought, you would instantly fly to the bank FD because the interest rates are high, right? Let’s take this a little more in-depth before we make a decision here.
Why do Investors Choose to Invest in the Post Office?
This is a tricky question even to ask. It’s like asking an investor why he is investing in a particular stock. Well, he knows the perks of it and also the drawbacks, and most importantly, he has done his part in the research and analysis. So, the question that you ask would not make much sense at all.
You also can’t ask him why he invested in it after the fund had failed; that would make completely no sense.
But what makes the post office still as famous as it was years ago, leading to people also choosing to invest in its FD schemes. Here are some details you would want to know about the post office.
History of our Post Office: The Post Office was established on the 1st of October in 1854, and you would know that it was so long ago. Even after all of these years, here we are talking about the post office. Have you ever wondered why? The post played an integral part from the very beginning of its establishment. Today, it has more schemes than any other financial institution would ever provide. Beginning from investment and savings schemes for girls all the way to senior citizens and farmers.
That is not the only reason why it still holds its head up high in the country. These schemes and the services that are offered by the post office are all backed up by the Indian government, which means what more could be safer. Sudden market movements or security issues would have a minimal effect on the post office. Moreover, when it is then backed up by the government, we can be assured that it will work in hand for the citizen’s welfare, and there would be no business motive.
Post Offices and It’s FD: Post office FDs do differ a little from a bank’s FD. They are mostly the same scheme but with minute characteristic changes. The post office FD is one where you can prematurely withdraw your money after six months, and the charges are comparatively very low to do so. Also, a post office FD has a maximum tenure of 5 years and begins at six months.
Why do Investors Choose to Invest in Bank FDs?
Banks, as we know, have been giving us different kinds of financial aid – and it can also be included in an FD. Bank FD rates are slightly higher than what a post office would offer.
Now again, this will differ from one bank to another. Not all banks will give you the same rate of interest. Some banks might have close rates, but there will always be slight variations from one to another.
But, the best part about a bank’s FD is the higher interest rate.
Other than that – a bank FD will also offer you more in terms of its service. Just say you have an account in the State Bank of India – (it’s a savings account). You can directly deposit this money into the same bank’s FD – all you have to do is open the account, choose your preferences, and deposit the money. The best part is that you can do all of this online through net banking or mobile banking.
The Bottom Line
Choosing between a post office FD or a bank FD will always stand on you; this is because every person will have a different financial goal – your investment needs to align with this financial plan and also attain the goals that you were aiming at. If you are an investor who has no time to go to things physically, a bank FD is a good choice (it would also be great for the investors that want to invest for tenures of more than five years). When you are an investor who likes to do things in person and wants to invest for less than five years – then the post office would do great.