How do banks calculate interest on your Fixed Deposits?

Banks and Non-Banking Financial Institutions (NBFCs) use two methods to calculate Fixed Deposit (FD) interest rate

A Fixed Deposit (FD) is a fixed investment scheme provided by many banking and non-banking financial institutions. FDs come with high interest rate but are subject to specific terms and conditions. They also have a lock-in period, which can range from 7 days to 10 years.

How do banks calculate interest in fixed deposits?

The FD interest rate is established at the time of opening the account. Different banks have different FD interest rate, but you can use an online FD calculator to the amount you will receive upon maturity based on an approximate interest rate. While you can break an FD before maturity, the interest you receive decreases. Also, you might have to pay a suspension charge for breaking your FD.

How to calculate fixed deposit interest?

Simple interest and compound interest are the two common methods for calculating the interest rate on a fixed deposit.

Simple Interest

The rate of interest is fixed for a set length of time. It is determined by multiplying the annual interest rate, the principal value, and the years left on the loan.

Simple Interest = Principal x Rate of interest x Time / 100

Compound Interest

This is the interest earned on both the principal and interest. It is determined by multiplying the following formula:

A = P (1+r/n) ^ (n * t)

Where A represents compound interest, P stands for the principal amount, r is the decimal rate of interest, n is the number of compounding that occur in a year, and t stands for the number of years.

How can a FD calculator help you calculate FD interest rates?

Calculating the maturity amount and interest rate of your FD is a complicated process. But an FD calculator can do the same for you with the click of a button. It allows you to save a significant amount of time when performing these complex calculations.

How to calculate interest using a fixed deposit calculator?

To utilise an FD deposit calculator efficiently, follow the procedures outlined below:

• Ensure you have the required details.
• Feed the data in the right slot.
• The maturity amount will be visible on the screen.

What are the benefits of using a fixed deposit calculator?

If you want to use a fixed deposit calculator to learn how your bank levies interest on your FD, you can always use IDFC FIRST Bank’s FD calculator.

Here are some advantages of using IDFC FIRST Bank's online FD calculator:
 

• You can calculate how much interest you will be eligible for at the end of the period. It allows you to budget more effectively.
• You can compare the interest and FD amounts to be received upon maturity of various financial institutions using the FD calculator.
• You will learn how much monthly interest you are making on a FD.
•  You do not have to pay anything to use the online FD calculator.
• It is easy to use.
• It shows you the results in seconds.

Disclaimer

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