Monthly Interest Payout Fixed Deposit (FD)

As mentioned earlier, the monthly interest on fixed deposits can offer a steady, predictable and regular source of income. You can receive the interest income every month on a specified date. However, you will receive the principal amount back when the fixed deposit matures.

Almost all financial institutions’ fixed deposits, like Banks and deposit-taking Non-Banking Financial Companies (NBFCs), offer the monthly interest payout option. You can choose the option while opening the fixed deposit. Once selected, the monthly interest payment would start the following month.

Following is the list of banks offering the highest interest rates annually for a deposit under 1 crore.

Most financial institutions specify the interest rate on an annual basis. To find out the monthly interest rate on the FD, you can use the yearly rate and divide it by 12. Alternatively, using the principal, you can calculate the interest amount annually and back-calculate the monthly interest rate.

However, checking the compounding frequency while calculating the monthly interest payout would be best. If the frequency is yearly, you can divide the interest rate by 12 to get the monthly rate. However, the calculation would change if the interest frequency is quarterly, monthly or half-yearly.

The following examples will help you understand how to calculate the monthly interest payout on FD.
 

Referring to the above example, you can cross-check your monthly interest by calculating it with an absolute number and cross-checking it with the interest computed by simply dividing it by 12.

If mathematical calculations prove challenging, you can use many financial institutions' fixed deposit calculators. These online calculators help you calculate the effective monthly interest rate and the interest amount. You just have to provide the following details:

• The deposit amount.
• The tenure.
• The rate of interest on an annual basis.
• The compounding frequency – annually, monthly, half-yearly or quarterly.
• Choose the mode of payout as monthly.
• Once you provide the details, you can calculate the interest income you can earn from your deposit annually and monthly.

To calculate the annual interest rate, follow the mentioned steps:

• Go to the bank's online site for opening a Fixed Deposit.
• Navigate to the services section and select "Fixed Deposit."
• If there's no FD calculator on the page, click on the option guiding you to it.
• Input the deposit amount.
• Choose the preferred tenor (duration) for the FD.
• Opt for the interest payout frequency, such as 'Monthly.'
• The calculator will then estimate the monthly interest payout based on the bank's interest rates.

With the non-cumulative fixed deposit, you get these benefits from monthly payouts:

• You get a guaranteed and regular source of income every month throughout the deposit tenure.
• The monthly interest payouts help you supplement the primary source of income.
• You can put the monthly interest payouts into another investment avenue and earn returns further.
• You can create a larger corpus to meet your financial goals as your savings increase.
• Monthly payouts are suitable for retired individuals because these come with a regular income stream.

Closing a Fixed Deposit with a premature withdrawal option before its maturity date involves a penalty from most banks. If the investor wishes to close their FD, they can visit the bank, fill out a form, and submit the necessary documents. The bank processes the closure request, deducts the applicable fees, and transfers the refunds to the account holder.

For added convenience, many banks offer an online option to close or break an FD account. Here are the steps:

• Visit the bank's website.
• Log in with your credentials, including username and password.
• Navigate to the 'Fixed Deposits' option among the listed services.
• Choose the 'Close account' option.
• Select the account you want to close from the list of FDs.
• Comply with any identity verification processes if required.
• Confirmations may be sent to your registered mobile number and email; verify them.
• After deducting penalty charges, the returns will be transferred to your savings account.
• Verify the updated amount in your account to ensure the successful receipt of the funds.

A non-cumulative fixed deposit scheme can create a monthly income stream for your expenses. The interest income would depend on the financial institution’s deposit rates, the tenure selected and the deposit amount. Further, senior citizens generally receive a higher interest rate than general FD accounts.

You can calculate the monthly interest amount on FD using mathematical calculations or the online fixed deposit calculator. Calculations can help you estimate the monthly payouts to budget your expenses accordingly.

You can choose fixed deposit schemes that offer the highest monthly interest rates. This would ensure maximum returns from your deposits and can grow your wealth.