How can I increase my FD returns with compound interest?
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Is it possible to receive the interest on the interest which i earn, as I want to use compound interest to increase the interest rate which I gain on FD? To get the maximum profit should I upgrade to high rate FD or leave it in place?
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Compound interest is one of the efficient ways to increase the value of FD money. In Regular FDs, which pay interest on only principal, for Cumulative FDs interest is reinvested. This means it provides interest on interest, which is good for long term growth.
You can manually move to high rate FD to get the maximum benefits of compounding if your bank is not reinvesting your earned interest. For better investment rates choose Cumulative FD for longer terms according to your financial goals.
So to get compounding benefit, use cumulative FDs, but before that review the rates, suitable terms, taxes and penalties and all the other factors as interest on FD comes under a taxable slab according to your income.
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You can get benefits from compound interest on your FD by choosing cumulative FD which means you can reinvest the interest which you earned on your FD.
It's a very good idea to get more profit by upgrading to higher-rate FDs. But check with your bank whether up-gradation is available or not. But when you are upgrading, evaluate all the terms and penalties related to the new FD.
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