When one thinks of investing money in a safe and reliable way, the first thing that often comes to mind is the use of Fixed Deposit accounts or Savings accounts with your banks. However, there is an alternative that is just as effective. You should consider investing your money through the Post Office Savings Scheme, or more specifically, the Post Office Recurring Deposit Account. Through this method, both your money and the interest you garner over time are safe and secure. It should also be noted that the potential risk is relatively negligible while still providing good returns.
With that said, have a look at this particular scheme and how you can make the most of it going forward.
The Post Office Recurring Deposit Account
The Post Office Recurring Deposit Account is a government-guaranteed scheme where one can deposit small amounts in instalments. It also gives you better interest rates. The benefits of this scheme are that the minimal amount can be as low as Rs 100 to get your investment journey off the ground and the upside is there is no upper limit on investment. You can quite literally invest as much money as you want.
There is, however, a caveat to this. When you normally open a savings account or a Fixed Deposit account with a bank, they give you options for a variety of tenures. In the case of the Post Office scheme, you can open the Post Office Recurring Deposit account for a fixed term of five years.
Post Office Recurring Deposit Interest Rate Breakdown
This scheme is one of the more popular choices as it offers an enticing interest rate of 5.8 per cent. This was the latest rate of interest that was rolled out by the government and made effective from April 1, 2020. The Central government fixes the interest rates of its small savings schemes every quarter. How it works is, the compound interest is calculated every quarter, making it highly effective as it helps investors generate earnings on a frequent basis.
To highlight the effectiveness of the Recurring Deposit investment, consider this: If you invest Rs 10,000 every month at the current interest rate of 5.8 per cent, then in 10 years’ time that amount would compound to give you around Rs 16 lakh in returns.
What is the Catch?
Sometimes things may seem too good to be true, but in this case, this is true. The only thing that you need to keep in mind is that to reach your goal, you need to regularly deposit money on a monthly basis. If by some chance you skip a month or miss a payment, then you have to pay a penalty of one per cent every month. If you miss four months of instalments in a row, the account will be closed automatically. However, you can still retrieve the account within 2 months from the date of default, but if you miss the window, it will be permanently closed.
It is also worth noting that this scheme allows applicants to withdraw up to 50 per cent of their deposit balance a year after the account has been opened. In the case that the individual opts for the rebate facility on the deposits given in advance, they will face a limit of six instalments only.
The scheme also allows account holders to nominate others to receive the pay-out in the case of the account holder’s death. This nomination process can be done at any point in time.
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