Types of Fixed Deposits: What You Need to Know About Cumulative, Non-Cumulative, and Flexi Options

In previous blog we've explained the logic behind Fixed Deposit in a very detailed manner but what about it's types?. So in this blog we will be explaining the types of FDR and rest assured everything will be very detailed and you won't have to look anywhere for the same purpose:

TYPES OF FDR:-

• Cumulative:-  Cumulative word means something is being added. So in cumulative FDR , whatever interest is being paid on predecided frequency, is added up with principal. For ex. Say you went to a bank and want to do a FD with $1,00,000 and bank is giving interest on quarterly basis, that means every three months interest will be paid and if every three months intested paid is $1000. so after three months principal will become $1,00,000+$1000=$1001000. Now for the next quarter interest will be calculated on $1001000 rather than $1,00,000. So here the benifit is as principal is increasing with every inerest paid, final interest received is more than the non-cumulative FDR.                                                                                                                                  

• Non-cumulative:- In Non-cumulative FDR interest is not added up with principal rather it is paid to you in your savings account. For ex:- if principal is $1,00,000 and $1000 interest is paid quarterly and your FD type is Non-cumulative then this $1000 will be paid to you. Generally, It is done by people to have a stream of income on regular basis.                                                             

• Flexi-deposit:-  Flexible deposit is great way to have liquidity of savings account along with availing higher interest benifits for fixed deposit.Flexi-deposit is linked with your own savings account. In your savings account a limit is set, and when that limit is reached, amount beyond that limit is treated as FDR that gives more interest than savings account and the beauty of this scheme is that you can withraw amount from that FDR without paying any penalty any time like your savings account.
  For ex: Say you went to bank and asked banker to make a flexi deposit in your savings account that has balance of $1,00,000/- and set limit $30,000. So amount till $30,000 will be shown in your savings account not full amount and rest $70,000 will be turned into fixed deposit and this $70,000 will attract more interest than savings account and if you wish to withdraw 60,000 from your savings account you can easily do it, that too without paying any penalty for withdrawing prematurely. 
  
  

How is Interest Calculated in a Flexi-Deposit?

In a Flexi-Deposit, interest is calculated daily based on the minimum balance in your linked FD account. Unlike traditional FDs, where interest is calculated monthly or quarterly, this daily calculation allows you to earn interest continuously.

The interest is credited to your savings account at regular intervals—monthly, quarterly, or annually—depending on the bank's terms. For example, if the interest rate is 6% annually, it’s divided by 365 to get the daily interest rate. As your balance changes, the interest is recalculated accordingly.