Choosing an investment instrument suitable to the financial goals is essential. You need to consider factors including, which type of deposit earns a higher interest rate, which investment instrument is flexible, and so on. Fixed deposit (FD) accounts and savings accounts are risk-free investment instruments that are not affected by market volatility. Even though the two investment tools have similar features, the difference between a savings account and a fixed deposit account is high. Fixed deposit accounts are chosen over savings accounts as a tool of investment. There are many reasons why a fixed deposit account is preferred by an investor. If you want to invest your money and are confused between FD and a savings bank account, this article is for you.

Fixed Deposit vs Savings Account: which is the better choice?

1. High-Interest rate

Earning interest is the goal of investing money rather than keeping it idle. When an array of options are available, a comparison should be made to decide on the investment with the highest returns. Returns from fixed deposits are comparatively higher from savings accounts. Banks or NBFCs (Non-Banking Financial Company) provide higher interest rates on fixed deposits. Interest on a savings account is calculated using a simple interest formula, the interest on an FD is computed on a compound interest basis.

2. Saves Taxes

High taxes on investments will reduce the total earnings. The difference between fixed deposit account and savings account is that the tax saving option on fixed deposits is higher than on savings accounts. There are tax-saving fixed deposit accounts specifically to save tax. As the returns are high, saving on taxes is also essential. If you don’t want to pay taxes on savings, fixed deposits are the best option.

3. Loan facility

Borrowing a loan is a tedious process. Multiple documents are required to avail loan from a bank or financial institution. The loan providers analyze the credit profile of investors before providing a loan. Fixed deposit accounts allow investors to borrow loans on the deposit amount. Savings bank accounts do not have any such facility. If you need a loan, a fixed deposit account acts as collateral for the loan. Most banks or NBFCs provide loans with the loan amount the same as the fixed deposit account principal account.

4. Habit of savings

Fixed deposit accounts are investments locked in for a longer tenure. If you have complete access to your account and can withdraw money anytime, saving money becomes difficult. Fixed deposit accounts are beneficial as access to your account is limited. It helps in reducing unnecessary withdrawals and increases earnings over time. Savings bank accounts, on the other hand, can be withdrawn whenever. Withdrawing money from the account regularly doesn’t help customers save. A savings account does not provide many options to investors. However, a fixed deposit account is according to the customer’s needs. For people who want periodic interest, there are many suitable accounts, and for people willing to block their money for a long tenure, interest payment at maturity can opt.

5. Periodic Interest payout

Both savings and fixed deposit accounts have interest payouts. The difference between a fixed deposit and a savings account is that an FD offers periodic interest payouts. The payouts from FDs are high to help you meet your expenses. The fixed deposit account payout period can be regular, semi-quarterly, quarterly, or payouts on an annual basis. Investors can also choose an FD account to earn interest on the maturity of tenure. By researching fixed deposit vs savings accounts, you will get an insight into the time of interest payout and the type of account.

6. Benefits for senior citizens

Out of the many types of fixed deposit accounts, opt for the most suitable and beneficial one. Senior citizen fixed deposit accounts have higher interest rates. Savings accounts are not customized for senior citizens. All the savings accounts are the same for all customers. An investor can choose a regular fixed deposit account, or a senior citizen fixed deposit account. The offers on senior citizen FDs are:

  • Interest on senior citizen FD accounts provides an additional interest of 0.50% to the investors.
  • Many banks have super senior citizen accounts as well, with additional interest rates.

Senior citizen fixed deposit accounts have many other product features including, flexibility for the investors to choose the tenure, premature withdrawal without penalty, nomination facility, and more.


Looking at the fixed deposits and savings bank account features, the advantages of FDs are a lot more. Apart from the points already mentioned, fixed deposit accounts can be customised by investors as per their needs. A savings bank account does not provide many options to the account holders. A fixed deposit account will be a way to generate a sum of the amount by the time of retirement. If your goal is to save money and want a risk-free investment tool, fixed deposits are a better choice than savings accounts.