When I started looking into investment options, I was unsure about the difference between a CD or Certificate of Deposit vs Fixed Deposit. Both seemed pretty similar at first, but as I learned more, I realised they serve different purposes depending on your needs. The principal amount that you invest here is the major distinction between a CD and a fixed deposit. Let me walk you through what I found out.
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FD vs CD Difference
Here are the CD vs fixed deposit differences:
CD | FD |
CDs are short-term investments, typically offering a maximum tenure of 12 months. | FDs provide more flexibility with tenures ranging from 7 days to up to 10 years, making them ideal for both short and long-term investments. |
You need to invest at least Rs.1 lakh here. | FDs you can start with a much lower amount, as low as Rs.1,000. |
CDs don’t provide funds by keeping collateral. | If you ever need to access funds quickly, FDs can be used as collateral for loans. |
CDs are not flexible with liquidity and borrowing. | FDs are flexible with liquidity and borrowing. |
CDs offer higher interest rates but come with a slightly higher risk. | FDs are lower-risk options that offer steady, predictable returns. |
CDs lock your funds until maturity. | FDs allow for premature withdrawals, though they might come with a penalty. |
Ultimately, if you’re looking for stability, flexibility, and ease of access to your funds, FDs are a superb choice. But if you’re looking for better returns, CDs might be more suitable. I hope you understand CD vs FD differences.
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Before telling you about the certificate of deposit vs fixed deposit, let me share with you what certificate of deposit and fixed deposit mean.
A certificate of deposit is a form of agreement between the investor and the bank where the investor pays an amount for a period of time and earns a good profit from it. The tenure of investment is fixed and afterwards, you can redeem your certificate of deposit.
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On the other hand, a fixed deposit is a financial instrument where you can invest money for a fixed period of time and earn profit at a predetermined interest rate.
Since both Fixed Deposit (FD), and Certificate of deposit (CD) are similar, let us understand the difference between certificate of deposit and fixed deposit.
Difference between FD and CD:
Cash Deposit |
Fixed Deposit |
The duration of CD is shorter than FD. The maximum tenure of a CD is 12 months. |
FD offers a wider range of tenures from a span of 7 days to 10 years of investment tenures. |
A minimum of Rs 1 lakh is required to invest in CDs. |
You can invest in FD at Rs. 1000 only. |
You cannot secure loans or other forms of financial aid with CD. |
You can apply for loans against your FD. |
Although CDs can help you earn more interest FDs are better because it provides long-term investment and it is a risk-free investment.
This is the certificate of deposit vs fixed deposit difference. I hope you find this helpful.
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Kapil
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2022-09-04T23:58:35+00:00 2022-09-04T23:58:36+00:00Comment
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