A Guide to Recurring Deposit Fees and Charges

Whether you are saving for a future goal or building an emergency fund, Recurring Deposits (RDs) offer a convenient way to save money while earning fixed returns. However, life is unpredictable, and there may be times when you need to access your RD funds before the maturity date. 

Breaking or prematurely withdrawing funds from an RD can come with certain costs that you should be aware of. In this guide, we will delve into the various recurring deposit account fees and provide strategies and tips on how to manage these fees effectively. 

Understanding Recurring Deposit Account Fees

Maintaining an RD account doesn’t incur any charges. However, premature withdrawal of RD has its implications. For example, if you withdraw RD within 3 months, you won’t earn any interest. Also, 1% penalty charge would be applicable on the prevailing interest rate. Also, if your RD account becomes inactive, as in you miss making RD payments multiple times, the bank may close your account.

Strategies for Minimising RD Fees 

• Compare Penalty Charges Across Banks: Before opening an RD, compare the RD premature penalty fees of different banks. Ujjivan doesn’t charge premature withdrawal fee for withdrawals made after 6 months from the time of deposit.
• Maintain Regular Deposits: Avoid non-maintenance fees by ensuring you deposit the RD instalment on time each month. Set up a standing instruction or automate your deposits. 
• Plan Withdrawals Carefully: Unless faced with an emergency, try to stay invested until maturity to avoid premature withdrawal penalties which can be as high as 1% of the withdrawn amount. 

Tips for Effective Cost Management

In addition to minimising RD fees, practicing prudent cost management can help you maximise savings. Here are some suggestions: 

• Maintain a Budget: Keep track of your income and expenses to identify areas where you can cut costs and redirect savings towards your RD. 
• Automate Savings: Set up automatic transfers from your salary account to your RD to enforce saving discipline and avoid missed instalments. 
• Increase Deposit Amount Periodically: As your income grows, consider increasing your monthly RD instalment to boost your savings.